Structured warrants give the buyer the right, but not the obligation, to buy (calls) or to sell (puts) the underlying security at a predetermined price (the strike or exercise price) on or before a predetermined date (the expiry date).

Structured warrants can be exercised at any time during the life of the warrant (American style) or only on the expiry date (European style). The majority of structured warrants now listed on the Singapore Exchange are of European style, we will therefore focus on European style warrants in this handbook.

If a structured warrant is in-the-money (ITM) at maturity, the warrant will be exercised, i.e. the right given by the warrant will be used. To the contrary, at maturity, if a structured warrant is out-of-the-money (OTM) or just at-the-money (ATM), warrant holders are not obliged to exercise the warrant and the warrant will become worthless.

For a call warrant, the warrant is termed ITM if the underlying security's price is above the strike and OTM if the underlying security's price is below the strike.

For a put warrant, the warrant is termed ITM if the underlying security's price is below the strike and OTM if the underlying security's price is above the strike.

The warrant is said to be ATM if the underlying security's price is equal to the strike, no matter it is a call or a put.