Hi
Sentiment has it that Japan is finally on the road to recovery and the Nikkei 225 certainly seems to be heading consistently North. I read in Investor's Chronicle last week that a great way to get exposure to the potential upside of the Nikkei 225 is SocGen's Nikkei 225 Tracker Warrant (ticker uk:SG05), which is a structured product that is designed to achieve the following: -
- Delivers 200% of any upside in the Nikkei 225 index (provided you hold on to the Warrant until it expires at the end of 2007) - thanks to leveraging
- Only suffers 100% of any downside (just like a regular tracker fund)
- Eliminates exchange-rate risk through appropriate hedging.
- Can be bought and sold on the LSE at any time like any share (so your money isn't necessarily locked in until 2007)
True enough it is growing like billy-o (it's up around £1400/warrant, from £1000 at launch last October) but the question I have is this (not being that au-fait with warrants):
Although the potential downside is quoted as 100% of any drop in the index, while the upside (due to leveraging) is quoted at 200%, does that only apply if you bought in at the launch, when the price was £1000? In other words, if you buy in now, at £1400, is there a potential 200% of loss downside, back down to the launch price of £1000, before reverting to 100% as per the product spec?
Just trying to work out the risks here.
Any input appreciated.
Many thanks Jeremy