Identifier: C4T7L5 | Revision: 2026-10-26 | Planned study: 10–15 minutes, excluding extended practice.

Decision and objectives

Choose whether the method addresses this lesson’s task before placing an order. Objectives: 1. Reconcile final fixing and maturity cash. 2. Identify when a warrant expires with no payment. 3. Distinguish warrant loss from underlying share loss.

Prerequisite: C4T7L4.

All prices, ratios, term sheets, credit recoveries and cash dates below are hypothetical teaching assumptions, not current offers. Amounts are TRY unless explicitly marked otherwise. The investor is a hypothetical Turkey-resident individual acting outside a business; all results are before actual tax, which requires issue, acquisition, income-year and legal-status checks. No current eligibility or live listing is asserted.

Mechanics

Warrant maturity is the resolution of an issuer obligation under the issue documents. Read final observation time, valuation source, exercise procedure, adjustment and disruption rules, cash or registered delivery, currency factor, payment date and rounding. A warrant’s last trading day can precede its final observation or cash date. Secondary-market trade settlement and maturity payment are different events. A long warrant may lose all purchase cash without the underlying becoming worthless; issuer failure can add another route to nonpayment.

Price and return drivers

For the declared European cash call warrant, gross =quantity ×r ×max(final fixing−strike,0), translated only if required. Deduct premium and investor charges for profit. The premium is not returned independently, and in-the-money cash can still be less than paid premium. A quoted underlying close is not automatically the contractual fixing. If the terms require exercise instructions, missing them can matter; if automatic processing is specified, verify the exact condition rather than assuming it from another issue.

Worked case

Synthetic maturity notice:1000 call warrants, K100,r0.1, purchase2.20,90-day European expiry, final underlying fixing defined by the sheet, automatic cash calculation, TRY payment three business days later. Entry and maturity costs total30. At fixing125, intrinsic per warrant2.50 and total cash2500. Paid premium2200, net270. At final fixing110, cash1000 and loss1230 despite the warrant being in the money. At fixing100 or90, cash0 and full purchase-and-cost loss2230. No extra collateral is owed by this fully paid unfinanced long under the declared simple terms.

Adverse case

Three expiry states90,100,125 produce−2230,−2230,+270; none uses a pre-expiry bid. A day before expiry, supplied bid0.60 allows cash600, net−1630 if sold; holding to an at-or-below-strike fixing can instead lose2230. Conversely the favorable125 fixing is not known at that earlier date. If a screen at a different observation time showed128 but the contractual fixing was125, using128 would overstate cash by1000 ×0.1 ×3=300. Issuer credit and disruption clauses remain relevant even after a positive payoff is calculated.

Practical use

Verify last trading time, final fixing, exercise/automatic-processing clause and maturity payment date separately. Reconcile actual payment after expiry with the issue and custody record.

For any actual domestic implementation, verify the exact issue/contract, authorized intermediary, account permission and executable size. Include spread, commissions, passed-through fees, funding/borrow, custody and exercise/exit costs without double-counting embedded charges. Recheck income year, residency/status, issue/acquisition dates and effective tax law; all case results remain before actual tax.

Decision boundaries

Use a maturity checklist before the last opportunity to trade. If cash is needed before the issue’s payment date, a positive modeled payoff does not meet the need. Decline carrying the position when the fixing or exercise terms cannot be verified; selling requires an actual bid. Compare total loss to the purchase budget, not to the referenced notional. The holder does not incur a writer’s unlimited loss under this plain fully paid warrant, but financed purchases can add separate debt beyond the premium.

Practice and references

Exercise:2000 put warrants K50,r0.05,purchase0.80,fees40, cash settlement. Solution: At final fixing40, cash2000 ×0.05 ×10=1000; premium1600; net−640. At fixing50 or60 cash0, loss1640. A favorable underlying direction therefore can coexist with a warrant loss if the payoff does not recover the original price and costs.

Takeaway: Use the issue’s final fixing and payment calendar; a warrant can lose all premium while its underlying remains valuable. Reference links: product card, formula; glossary: Final fixing; Maturity payment; Premium loss. Next: C4T8L1. Topic test.

Sources: Borsa Istanbul: Equity Market Functioning (retrieved 2026-10-26; Continuous trading with market making; warrants and certificates). SPK: Warrants and Investment Institution Certificates Communique VII-128.3 (retrieved 2026-10-26; Articles 3, 4, 6, 7, 13 and 15). GIB: Provisional Article67 Guide for Individuals (retrieved 2026-10-26; Sections1,3–9 and19; publication introduction). Revision 2026-10-26; recheck changing terms before publication.

Shared reference guide | Class examination