Identifier: C4T7L1 | 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. Translate a warrant ratio into underlying units. 2. Separate issuer obligation from underlying ownership. 3. Annotate the governing issue terms.

Prerequisite: C4T6L5 and the completed earlier classes. Foundation: Stock Market School.

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

An investment institution warrant is an issuer-created security with a contingent right. The buyer has a claim under the issue documents, not direct ownership of the referenced asset. Keep it separate from a company subscription warrant, which can involve new-share issuance and dilution. Identify issuer, any guarantor, underlying and its currency, call/put direction, strike, expiry, exercise style, settlement currency, conversion ratio, adjustment rules and calculation agent. Issuer credit is an additional risk beyond the underlying payoff.

Price and return drivers

Write the ratio in an unambiguous direction. If10 warrants correspond economically to1 underlying unit, r=0.1 underlying unit per warrant. For a simple cash-settled call warrant, gross expiry cash per warrant =r ×max(S−K,0), with an additional currency factor if the contract requires it. A displayed number10 without “warrants per unit” is incomplete. Contract adjustments and FX or quanto terms can change the calculation. A low absolute warrant price can simply reflect a small ratio.

Worked case

Annotated synthetic term sheet: issuer Atlas Securities, no separate guarantor; underlying hypothetical Turkish share priced inTRY; call strike100; European expiry90 days; final fixing specified by the sheet; r0.1 share per warrant; TRY cash settlement two business days after expiry; no barrier. Buy1000 warrants at2.50 with total charges40. Economic referenced units=1000 ×0.1=100. At expiryS140, payoff per warrant=0.1 ×40=4, total4000, premium2500, net1460. The investor does not receive100 shares under these cash-settlement terms.

Adverse case

At expiryS80,100,140 gross per warrant is0,0,4 and total net is−2540,−2540,+1460. A second sheet using ratio0.01 rather than0.1 would pay only400 total atS140 and net−2140 at the same purchase price, showing why ratios cannot be inferred from a name. Before expiry a supplied executable bid2.10 yields2100−2500−40=−440 even if a favorable final fixing is forecast. If the issuer defaults, the modeled contingent amount may not be received; no exchange listing eliminates that contractual credit exposure.

Practical use

Obtain the exact issue disclosure and verify issuer/guarantor, ratio direction and custody identifier. Normalize economic underlying units before comparing with a listed option multiplier.

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 the worksheet to compare two issues on equal economic units and cash dates. Confirm whether the quote is a warrant price or an option-equivalent price already ratio-adjusted. Decline if the ratio direction, FX rule, fixing source or legal obligor cannot be established. The SPK framework supports distinct warrant and certificate structures; it does not establish that this fictional issuer or issue exists. Do not infer a maturity cash date from the secondary-market trade-settlement cycle.

Practice and references

Exercise: a put warrant sheet states20 warrants per underlying unit, strike80, final fixing60, cash settlement inTRY and no FX factor. Solution: Buy2000 warrants at0.70, costs40. Ratio r=1/20=0.05; equivalent units100. Gross cash=2000 ×0.05 ×20=2000; premium1400; net560. The phrase “conversion ratio20” alone would not be sufficient to reproduce this result.

Takeaway: A warrant ratio must state its direction, and a favorable underlying payoff remains an issuer claim. Reference links: product card, formula; glossary: Warrant; Conversion ratio; Issuer credit risk. Next: C4T7L2. 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