Société Générale has launched the first set of inline warrants linked to currency pairs. The new products follow recent launches featuring EUR/GBP and EUR/USD currency pairs and is comprised of eleven inline warrants linked to the EUR/CHF exchange rate with maturities until December 2016.
The products offer a blend of a classic 'stay-high' and 'stay-low' warrant, with the call option paying-out a minimum of 10 euros at the end of the term if the underlying asset has never fallen to or below the built-in barrier. The warrants comprise a barrier which is a call option below the strike price and a put on the strike price. If the barrier is breached, the possibility of a minimum return payment is eliminated, and the warrant turns into a traditional warrant with the chance to receive payment of the intrinsic value of the underlying asset at maturity and the risk of total loss.
This is the latest addition to the bank's inline warrants range in Germany and Austria, and adds a new currency pair to the existing offering (EUR/GBP; EUR/USD), according to Alana Maue (pictured), product manager cross-asset at Societe Generale in Germany. "We believe the timing is perfect for investors seeking alternatives to the EUR/GBP warrants which are attractive for investors because of the Brexit campaign," said Maue. "With this range of products, we can react to market moves and offer investors access to strategies that can be used more tactically and opportunistically."
According to Maue, SG's inline warrants range is driving significant activity and the banks has plans to continue to expand it and bring new ideas to the market. "The range has done well in terms of sales however sales were slightly down last year because markets were going up quite consistently," said Maue. "Inline warrants work better when markets are going sideways so that investors can capitalise on their views (up/down)."
However, since the beginning of the year because of the more sideways driven market inline warrants have picked up and investors are using them to benefit from the market environment, according to Maue. "Inline warrants are cheaper when markets are volatile because of the higher risk of knock-in and this is also a reason why there is more demand at the moment. "
The current exchange rate Euro-Swiss franc at 1.08885 CHF (52-week low at 1.0314 CHF on 06.29.2015, 52-week high of 1.1205 CHF on 02.04.2016) offers investors who want to bet on the euro moving sideways in the short term, said Peter Bösenberg, director and head of public distribution Germany & Austria at Société Générale.
Inline warrants on the German market have surged from 26,275 new products brought to market in March to 139,151 products year to date, of which over 9,000 are still live products. From an issuance perspective, Societe Generale with over 77,000 products is the most active provider, followed by Commerzbank (32,411 products), Unicredit (26,552 products), Deutsche Bank (3,111 products), and DZ Bank (67 products).
The French bank is currently working on the launch of its first inline warrants linked to currency pairs featuring an Asia-Pacific currency, according to Maue. "The new EUR/JPY inline warrant will be launched at the end of the week," said Maue.
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