NOVEMBER 2014 LISTED PRODUCTS COVERED WARRANTS HOW TO TRADE Covered warrants are products suitable for professional clients and sophisticated retail clients in the UK who have a good understanding of the underlying market and product characteristics. In particular, it is important that investors appreciate at the outset that they could lose all their invested capital when investing in this type of product. www.sglistedproducts.co.uk
CONTENTS GLOSSARY 3 HOW COVERED WARRANTS WORK 4 HOLDING COVERED WARRANTS TO EXPIRY 5 HOW COVERED WARRANTS ARE PRICED BEFORE EXPIRY 7 MAKING GAINS IN FALLING MARKETS 9 5 STEPS TO COVERED WARRANT TRADING 10 WHAT ARE THE RISKS? 12 FAQS 14 Freephone 0800 328 1199
GLOSSARY In reading this brochure you may find useful this glossary of terms associated with covered warrants. AT-THE-MONEY (ATM) A covered warrant whose exercise price is near or equal to the underlying security s price. CALL COVERED WARRANT A covered warrant which gives the covered warrant holder the right, but not the obligation, to buy the underlying security at a predetermined price (strike price), on a predetermined date (expiry date). The value of a call warrant will generally appreciate when the price of the underlying security appreciates. DELTA A value that represents the sensitivity of a warrant s theoretical value to a change in the price of the underlying security. EFFECTIVE GEARING The ratio between a percentage change in the underlying security and the resulting percentage change in the covered warrant s price. For example, if a covered warrant has an effective gearing level of 8x, a 1% move in the underlying asset would result in an 8% move in the price of the covered warrant. It is calculated as the ratio of the underlying asset price to the covered warrant price multiplied by the delta (multiplied by the conversion ratio, if applicable). EXPIRY DATE The date after which the covered warrant may no longer be exercised or traded. INTRINSIC VALUE For a call covered warrant, the amount equal to the market value of the underlying security less the exercise price. For a put covered warrant, the amount equal to the exercise price less the market value of the underlying security. The intrinsic value corresponds to the amount by which a covered warrant is in-the-money. IN-THE-MONEY (ITM) A covered warrant with a strike price below (for a call covered warrant) or above (for a put covered warrant) the price of the underlying security. LEVERAGE EFFECT A feature of covered warrants which describes the fact that changes in a covered warrant s price (in percentage terms) will be larger than those observed for the underlying security. Leverage is also called Elasticity or effective gearing. OUT-OF-THE-MONEY (OTM) A covered warrant with a strike price above (for a call covered warrant) or below (for aput covered warrant) the price of the underlying security. PARITY The theoretical number of covered warrants that would give the right to either buy (for call covered warrants) or sell (for put covered warrants) one unit of the underlying security. Note however that the minimum trading size is 1 covered warrant. PRICE OR PREMIUM The amount paid for the covered warrant. PUT COVERED WARRANT A covered warrant which gives the covered warrant holder the right, but not the obligation, to sell the underlying security at a predetermined price (strike price), on a predetermined date (expiry date). The value of a put covered warrant will generally appreciate when the price of the underlying security depreciates. SECURITISED DERIVATIVE Instruments that derive their value from another security (the underlying security), such as a share, share price index, currency or bond. SPOT The latest trading price of the underlying share or index. SPREAD (BID/OFFER) Difference between the lowest offer price and highest bid price on the secondary market. STOP-LOSS A spot price/level where the investor will sell a security, designed to limit an investor s loss on a position. STRIKE PRICE The price at which the covered warrant holder has the right to buy (for call covered warrants) or sell (for put covered warrants) the underlying security. TARGET LEVEL The target level at expiry for a covered warrant is the expected underlying closing spot price/level an investor will use to calculate the potential redemption value. An investor trading a call covered warrant would expect the underlying spot to be above the strike, and below the strike for a put covered warrant. THETA A value that represents the sensitivity of a covered warrant s value to the passage of time. Theta (pence a day) shows the theoretical fall in the covered warrant price for one day with all other factors remaining constant. Theta per day accelerates as the warrant nears maturity. TIME DECAY A term used to describe how the value of a covered warrant erodes or reduces with the passage of time. Time decay is quantified by the Theta. TIME VALUE The portion of a covered warrant s price that is not accounted for by the intrinsic value. UNDERLYING OR UNDERLYING SECURITY The security over which the covered warrant is issued. WARRANT Warrants are issued by a financial institution, which defines their characteristics. They are traded on the London Stock Exchange (LSE) and settled through CREST, in the same manner as share trades. VOLATILITY Volatility represents the extent that the price of the underlying security has moved during a specific time period. The historical volatility of the underlying security can be calculated by taking the historical return during a defined period. However, when pricing a covered warrant, it is necessary to take into consideration the volatility which is anticipated (or implied ) by the financial markets for the lifetime of the covered warrant as it will dictate whether the covered warrant is likely to expire in-the-money or not. 3 16 www.sglistedproducts.co.uk
HOW COVERED WARRANTS WORK WHAT ARE COVERED WARRANTS? Covered warrants are financial products, listed on the London Stock Exchange (LSE), which give the buyer the right, but not the obligation, to buy (call) or sell (put) an asset such as a share, index, commodity or exchange rate at a predetermined price (strike price) on a predetermined date (expiry date). Covered warrants can be traded through any UK stockbroker and enable investors to put in place a highly risky strategy that amplifies the movement of the underlying. Your maximum loss is always limited to the initial amount invested, however, covered warrants are considered as high risk as the capital is fully at risk. At expiry, should the price of the underlying be below the strike price for a call (or above the strike price for a put), the covered warrant would expire worthless and all capital will be lost. GEARING The main attraction of trading covered warrants is the gearing they provide. Covered warrant investors are only required to invest a fraction of the price that it would cost to purchase the underlying asset directly. As covered warrants are geared instruments, they amplify the returns provided by the underlying security in relation to the amount invested. However, it is important to note that the investor is not purchasing any of the underlying assets and will not acquire any ownership rights. For example, a covered warrant with effective gearing of 10x will move 10 times faster than the underlying. For a call (positive view on the underlying), should the underlying value increase by 1%, the value of the covered warrants would increase by roughly 10%. The opposite is also possible; a 1% decrease in the underlying would result in a 10% loss in value for a covered warrant. You should note that the effective gearing of a covered warrant only gives an indication of the likely change in the covered warrant price for a 1% movement in the underlying share. If this movement takes place over a longer period or if other factors impact the covered warrant price, then the returns on the covered warrant investment may differ from those indicated by the effective gearing calculation. LIMITED LIFE Each covered warrant has a fixed lifespan which is set when the covered warrant is first issued. A covered warrant s lifespan is determined by its expiry date. The expiry date of the covered warrant is the last day on which the covered warrant can be traded. For example, a June Vodafone call could be issued in February and would continue to be tradable until a set day in June of that year (usually the third Friday of the month). Short dated covered warrants (less than 1 month to expiry) tend to be highly volatile and the most risky. Less experienced investors should consider using covered warrants with at least 6 months remaining to expiry, to allow for their investment objectives to be realised. They should also seek independent investment advice from a qualified advisor. Among the covered warrant product range there are a variety of warrant durations to help you choose the covered warrant that best suits your investment views. You can find short term to longer term covered warrants with 3, 12 or 24 month durations. Where you chose to hold the covered warrants to expiry, the cash value of the covered warrants is automatically paid out into your broker account with no action required on your behalf. LIMITED LIABILITY Perhaps the most important characteristic of covered warrants is that they are a strictly limited liability investment, i.e. you can never lose more than your original investment. In other words, if you invest 100 in a covered warrant, 100 is the maximum amount you could ever lose on your trade. Unlike other speculative instruments such as Contracts for Differences (CFD s) and SpreadBets, where investors risk losing much more than their original investment, covered warrants offer a completely different take on risk. Nevertheless, you must bear in mind that you can lose your invested capital very quickly should the underlying value move sharply against your position. CONCLUSION SG covered warrants are appropriate instruments for sophisticated retail and professional clients who understand the risks and who are interested in short and medium term trading. They can offer high gearing and the maximum losses are limited to the amount invested. Levels of effective gearing for all SG covered warrants can be found on our website, www.sglistedproducts.co.uk or by calling our freephone line, 0800 328 1199. Freephone 0800 328 1199 4 16
HOLDING COVERED WARRANTS TO EXPIRY PRINCIPLES BEHIND COVERED WARRANTS The majority of covered warrant deals are undertaken for short term (e.g. three days to three months) trading targets. However, covered warrants can be held to expiry and we will take a closer look at what happens in this case below, as this will help explain the principal behind covered warrants. All covered warrants are cash settled instruments. This means that no certificate is exchanged if you are trading a covered warrant based on a UK share and you will not receive barrels of Brent oil on your doorstep if you hold Brent covered warrants to expiry. If you hold your covered warrant to expiry and it has a positive value, the cash amount will be automatically paid in to your broker account. With no action required on your behalf. A call covered warrant s value at expiry is calculated the following way: Payout formula = (Price of underlying security Strike price of covered warrant) Parity A covered warrant s strike price (or exercise price) therefore represents the minimum value the underlying needs to be at expiry for the covered warrant to pay out with positive value. The strike price is fixed when the covered warrant is issued and remains unchanged to expiry, except if a corporate action is taken on the underlying. A covered warrant s parity is a fixed divisor that allows the covered warrant to be quoted in pence rather than in pounds. Covered warrants on shares will have a parity of 1 or 10, whereas a covered warrant on indices will have a parity of 100 or 1,000. The parity for each covered warrant is clearly shown on the Societe Generale exchange traded products website www.sglistedproducts.co.uk As an example of calculating a covered warrant s expiry value, let s say that you hold an ABC Ltd call covered warrant with a strike price of 100p and a parity of 1. If, at the covered warrant s expiry, ABC Ltd shares are trading at 130p, you would receive a positive cash pay-out of 30p per covered warrant. This amount would be automatically transferred to your broker account. Payout formula = (Price of underlying security Strike price of covered warrant) Parity If ABC Ltd shares were at 100p or below at expiry, however, the covered warrant would expire worthless, i.e. there would be no cash payment and the invested capital would be entirely lost. IN, AT OR OUT OF THE MONEY When the market price of a underlying on which a call covered warrant is based is above the strike price, the covered warrant is said to have intrinsic value. This is because, were the covered warrant to expire at that moment, there would be a positive cash payout. For this reason, covered warrants which have intrinsic value are described as being in the money. By the same reasoning, call covered warrants which have no intrinsic value (i.e. the underlying price is below the strike price) are called out of the money. If a covered warrant expires out of the money there is zero cash payout. A covered warrant can change from being out-of-the-money to in-the-money as the price of the underlying rises and falls during the covered warrant s life. Let s consider a 2 year call covered warrant on XYZ Ltd with a strike price of 450p that was issued when the underlying price was 400p. At this time the covered warrant was out of the money. Two months later, the underlying price had risen to 450p, meaning the covered warrant was now at the money. Closer to expiry, the underlying price rose steadily above 470p, meaning the covered warrant moved and expired in the money. 5 16 www.sglistedproducts.co.uk
These price movements are illustrated in the following chart. XYZ LTD 450P CALL BREAKEVEN CALCULATION The breakeven price for a covered warrant is the price the underlying needs to be at expiry for the covered warrant trade to make neither a profit nor a loss. For an equity covered warrant, this is defined as: Breakeven for a call = strike price + (covered warrant price when bought x parity) Breakeven for a put = strike price (covered warrant price when bought x parity) In a similar fashion, a covered warrant can change from being in-the-money to out-of-the-money. In the example above, this would be the case if the underlying price moves from 470p to 400p. The relationship between the value of an underlying ( spot price) and the Strike price of a covered warrant based on that underlying can be summarised as follows: Description Call Intrinsic Payout at warrant value expiry In the Money Spot > Strike Yes Yes At the Money Spot = Strike No No Once the breakeven price is determined, you know how far the underlying price would need to rise (for a call covered warrant) or drop (for a put covered warrant) for the price of the covered warrant to be the same at expiry as the purchase price. For example, if an XYZ Ltd call covered warrant with a strike price of 600p, and a parity of 1 can be bought at 15p, then the covered warrant has a breakeven of 600p + 15p = 615p. i.e. if XYZ Ltd is 615p at expiry, the payout for the covered warrant (615p 600p = 15p) is exactly the same as the amount paid for the covered warrant in the first instance. Alternatively, if you buy a Share Index ABC put covered warrant with a strike price of 6,000 and a parity of 1,000 for a price of 20p, the breakeven level for the ABC Index will be 6,000 (0.20 x 1,000) = 5,800. This means that the index would have to drop to 5,800, at expiry, for you to receive at least the 20p per covered warrant you first paid. Out of the Money Spot < Strike No No Freephone 0800 328 1199 6 16
HOW COVERED WARRANTS ARE PRICED BEFORE EXPIRY COVERED WARRANT SIMULATOR Unlike shares, which see their price vary depending on levels of supply and demand, covered warrants are priced using mathematical models. These models are used by all investment banks and traders to price covered warrants and options. An online version of a covered warrant simulator used by Societe Generale is available at www.sglistedproducts.co.uk Underlying price Time to expiry Implied volatility Covered warrant simulator covered warrant price The three most important elements fed into a covered warrant simulator are: The price of the underlying security, the time to expiry and market volatility. A covered warrant price is then calculated automatically by an options calculator. As such, unlike share prices, covered warrant prices are not affected by day-to-day changes in supply and demand. UNDERLYING PRICE As discussed before, the impact of movements in the price of the underlying security on the covered warrant price is straight forward and summarised below: Underlying price Call price Put price Underlying price increases Underlying price decreases Call covered warrants are, therefore, attractive to those who believe markets will rise (bulls) and put covered warrants attractive to those who believe markets will fall (bears). TIME TO EXPIRY If a share on which a covered warrant is based is exactly the same price tomorrow as it was today, the covered warrant price itself is likely to decrease either by a fraction if the covered warrant has a long life or by a clearly noticeable amount, if the covered warrant is short dated. This is known as time decay. Time decay is highest for short dated out of the money covered warrants and lowest for long dated in the money covered warrants. The time decay element can be measured for each covered warrant. You can find indicative time decay data on the Societe Generale exchange traded products website. 7 16 www.sglistedproducts.co.uk
As illustrated by the diagram below, the more time that passes, the greater the rate of time decay experienced. At expiry, time value is nil. Let us assume that implied volatility levels for the 3 covered warrants are as in the table below (this is for example purposes only): Time value Expiry Share Volatility New Tech Co 68% Share Index A 17% ABC Ltd 27% Time VOLATILITY Volatility is a measure of how erratic a share s price movements are likely to be. A new technology company share, for example, tends to be a highly volatile stock, whereas a more traditional company tends to be less volatile. Generally, for both calls and puts, the higher the anticipated volatility level (implied volatility), the more expensive the covered warrant. This is because the price of a covered warrant is a reflection of the probability the covered warrant will expire in the money. Anticipated volatility level Call price Put price Underlying implied volatility increases Underlying implied volatility decreases Societe Generale sources volatility from different market indicators such as the volatility linked to option prices. An indication of volatility is given for each covered warrant on the covered warrant s detail page viewable on www.sglistedproducts.co.uk A volatility level of 17% means that the market believes the Share Index A is likely to be 17% above or below its current level in a years time. The figures of 27% and 68% indicate much wider ranges for the two shares. It is possible that the market s view on the future volatility of a particular security will change during the covered warrant s lifetime, if a company announces a change of business focus, for example. The movement in the covered warrant price may be positive or negative depending on whether the impact of the event is expected to increase or decrease future volatility in the stock price. CURRENCY RISK It should be noted that for covered warrants on non UK underlyings (such as Nasdaq 100 or the Nikkei 225 index), a further variable affecting the covered warrant price is the exchange rate which converts the price of the covered warrant into sterling. This exchange rate risk can have a net positive or negative impact. CONCLUSION In summary, it is important to note that while changes in the underlying price are the most important factor for covered warrants, other variables may lead to a change in covered warrant price before expiry, even if the underlying itself is unchanged. Freephone 0800 328 1199 8 16
MAKING GAINS IN FALLING MARKETS PUT COVERED WARRANTS Covered warrants are flexible instruments in that they allow you to take views on underlyings that you think will rise (calls) but also on those that you think will fall through put covered warrants. Here we take a closer look at how put covered warrants work. Put covered warrants work just like their call counterparts in that they provide you with leveraged exposure to an underlying stock, index, commodity or currency. Where call covered warrants would increase in value as the underlying goes up, put covered warrants increase as the underlying price falls. Let s take a look at an example on ABC Ltd shares. You believe that the share is likely to drop in the coming weeks and wish to gain some leverage on the share in case it does. Alternatively, you could simply wish to hedge a shareholding in ABC Ltd. With ABC Ltd shares trading at 600p, let s assume you can purchase a put covered warrant with effective gearing of 10x for 60p. Remember that: Change in covered warrant s price = Effective gearing of covered warrant x % change in underlying As mentioned earlier, the effective gearing is purely indicative as the covered warrant value can be impacted by other factors than the underlying itself. If ABC Ltd shares drop by 4% from 600p to 576p, for instance, the put covered warrants value would increase by 40% from 60p to 84p (all other factors remaining the same). Change in covered warrant s price = 10 x 4% = 40% It is important to remember that a covered warrant s leverage works both ways, i.e. if you were wrong in your prediction and ABC Ltd shares had gone up by 4% instead of down, in this case the covered warrant s value would have decreased by 40%. However, with covered warrants you can never lose more than your original investment when markets move against you. SUMMARY The impact of movements in the price of the underlying security on the covered warrants price is straight forward and summarised below. Underlying price increases Underlying price decreases Call price Put price Call covered warrants are therefore attractive to those who believe markets will rise (bulls) and put covered warrants attractive to those who believe markets will fall (bears). 9 16 www.sglistedproducts.co.uk
5 STEPS TO COVERED WARRANT TRADING The methodology relies on the Societe Generale 5 Steps. It has been designed to help sophisticated investors understand the principles of geared investment. Nevertheless, please be aware that Societe Generale does not offer investment advice with respect to covered warrants. Covered warrants are suitable for sophisticated retail and professional investors, who have a good understanding of the underlying market and product characteristics. In particular, it is important that the investor understands that he could lose all his capital when investing in this product, even if it is held until the end of its term. These products have a short term maturity and are eligible for Capital Gains Tax (CGT)*. Societe Generale is the only market-maker and therefore the only liquidity provider for SG Covered Warrants. Liquidity will only be available in normal market conditions. Please see the Secondary Market section on page 13 for more information. This means that you may find it difficult or impossible in certain circumstances to sell the covered warrant or may be offered a price less than you paid for it. 1. ASSESS THE RISKS Prior to any investment in covered warrants, you should make your own appraisal of the risks from a financial, legal and tax perspective, without relying exclusively on the information provided to you by your own suitably qualified investment advisors, or any other professional advisors. In particular, you must remember that your entire invested capital is at risk. As a consequence, you should not deal in this product unless you understand its nature and the extent of its exposure to risks. 2. DEFINE A SCENARIO WITH A SPECIFIC TIMEFRAME Once the risks are assessed, you will have to select an underlying and an investment view (bullish or bearish) over a certain time period. For instance, you anticipate a 150 point growth in the FTSE 100 over the next 6 months or you might identify trading opportunities in major stock, commodity and currency markets around the world. Characteristics such as timeframe, Target Level and Stop-loss have to be defined. Simply thinking that the FTSE 100 will rise is not a detailed enough scenario as it does not give an indication of the timeframe or levels needed (Target Level and Stop-loss) for your investment to be realised. *Any statement in relation to tax, where made, is generic and non-exhaustive and is based on our understanding of the laws and practice in force as of the date of this document and is subject to any changes in law and practice and the interpretation and application thereof, which changes could be made with retroactive effect. Any such statement must not be construed as tax advice and must not be relied upon. The tax treatment of investments will, amongst other things, depend on an individual s circumstances. Investors must consult with an appropriate professional tax adviser to ascertain for themselves the taxation consequences of acquiring, holding and/or disposing of any investments mentioned in this brochure. Freephone 0800 328 1199 10 16
3. SELECT YOUR COVERED WARRANTS, GO TO www.sglistedproducts.co.uk Here are some ground rules to keep in mind at this stage: If you have a bullish market view, i.e. you anticipate a rise in the underlying, select a call covered warrant. If it is a bearish view, i.e. you anticipate a fall of the underlying, select a put covered warrant; Whatever your market view, multiply the timeframe in which you believe your view will be realised by at least 2 or 3 to select the maturity of your product, this will help reduce the effect of time decay over the anticipated time of the investment; Select a realistic strike price. There is no point in choosing a covered warrant with a strike price that you know the market will never be likely to reach; Check the delta. Delta can be defined as a value that represents the sensitivity of a covered warrant s theoretical value to a change in the price of the underlying security. Remember, the lower the delta, the riskier and the cheaper the product. Ideally it should be between 30% to 60% for calls and between -30% to -60% for puts; 4. SIMULATE THE OUTCOME By using the covered warrant simulator available on www.sglistedproducts.co.uk, you can see the effect of your scenario on the selected underlying and simulate what will potentially happen to the covered warrant s value. This helps you to estimate the impact on the price of the covered warrant of a movement in the underlying price, volatility and time. You can also use this tool to simulate different outcomes and gain a good understanding of the potential risks and returns. The outcomes of the simulator are for information purposes only and not an indicator or a guarantee of future performance. Under no circumstance should it, in whole or in part, be considered as an offer to enter into a transaction. 5. TRADE AND MONITOR YOUR POSITION Make the trade with your usual UK stockbroker. Covered warrants can be held in your standard trading account. Societe Generale has no facility to trade directly with private investors. Some might also be interested in considering the gearing. Be careful not to choose a covered warrant too highly geared, as gearing works both ways and should be seen more as a risk indicator than as a decision making criteria. For instance, for a bullish scenario on the FTSE 100 of a 200 point upward move in a 1 month period, a call covered warrant with a maturity in 3 months, a strike price of 200 points above the current index level and a delta of, say, 45% would fit the parameters required. Product characteristics, including product code, strike price, delta and effective gearing are available for each product on the Societe Generale exchange traded products website. You can select an appropriate covered warrant from the list of underlyings available on www.sglistedproducts.co.uk, depending on your view and risk profile. 11 16 www.sglistedproducts.co.uk
WHAT ARE THE RISKS? CAPITAL AT RISK The products described within this document are suitable for sophisticated retail and professional clients. Leveraged returns are a major advantage of a covered warrant but can also work against investors. You should be aware that, if the covered warrant s underlying instrument moves in the opposite direction to that which you anticipated, the losses incurred by the covered warrant will be greater in percentage terms than those incurred by a direct investment in the underlying itself. The prices of covered warrants can therefore be volatile. Covered warrants have a limited life, as denoted by the expiry date of each issue. After this date, covered warrants can no longer be traded or exercised. Capital is fully at risk. At the expiry date: For a call, should the final value of the underlying be below the strike price, the final value of the call covered warrant would be nil; For a put, should the final value of the underlying be above the strike price, the final value of the put covered warrant would be nil. Before expiry, you should note that covered warrants experience time decay (erosion of their time value) throughout their life. The rate of this decay accelerates as covered warrants near expiry and covered warrants may expire worthless. You should not buy a covered warrant unless you are prepared to lose all of the money you have invested plus any commission or transaction charges. It is important to note that while changes in the underlying price are generally the most important factor for covered warrants, other variables such as market volatility, interest rates, exchange rates and dividends may lead to a change in the price of a covered warrant even if the underlying itself is unchanged. Freephone 0800 328 1199 12 16
UNDERLYING RISK The value of the product will depend on the value of the underlying, which may be volatile. Covered warrants are not suitable for all investors, we recommend that potential investors study the Final Terms and consult their own independent professional advisors before making any decision. COUNTERPARTY RISK The products are issued by Societe Generale Acceptance a member of the Societe Generale group of companies. Any failure by Societe Generale Acceptance as Issuer, or by Societe Generale as Guarantor, to make payments due under the product may result in the loss of all or part of your investment. You will have no claim for compensation from the Financial Services Compensation Scheme nor by any similar scheme in the country where the Issuer is domiciled. LIQUIDITY RISK Societe Generale is the only market-maker and therefore the only liquidity provider for this product. Liquidity will only be available in normal market conditions. Please see the following Secondary Market section for more information. CURRENCY RISK For a covered warrant whose underlying asset is quoted in a currency other than GBP, exchange rate fluctuations can impact both positively and negatively upon the price of the covered warrant. SECONDARY MARKET Investors can typically buy or sell these products at any time on the secondary market prior to the exercise date on any regular LSE trading day from 08:05 to 16:30. The value of the products will vary on an intraday basis according to market conditions. Societe Generale is the only market-maker and therefore the only liquidity provider for all SG Exchange Traded Products. Societe Generale will refresh the prices throughout the trading day according to LSE rules. The liquidity offered is monitored by the LSE monitoring team, both in terms of spreads and sizes. Cases in which there is no guarantee that liquidity or live prices will be available on the secondary market and therefore normal market conditions may not prevail, including where: The underlying price is suspended or not tradable; Failure in the LSE or Societe Generale systems; Abnormal trading situations e.g sudden and sharp volatility increase or lack of liquidity in the underlying. This means that you may find it difficult or impossible in certain circumstances to sell the covered warrant or may be offered a price less than you paid for it. 13 16 www.sglistedproducts.co.uk
FAQS HOW CAN I TRADE COVERED WARRANTS? Trades in covered warrants can be executed through your UK stockbroker in almost exactly the same way as trading shares. Note Societe Generale has no facility to trade directly with private investors. You can trade within your standard trading account and your Self Invested Personal Pension (SIPP account), online or by telephone. However, you cannot trade covered warrants within your Investment ISA*. Societe Generale Option Europe are acting as market maker and provide investors with a price for each covered warrant (a bid/ offer spread) on the LSE Order Book. IS MY INVESTED CAPITAL AT RISK? Your invested capital is fully at risk. Before trading you should ensure that you understand the nature of covered warrants and the extent of their exposure to risk. However, the maximum loss is limited to your initial investment. Before you trade covered warrants you might be asked to complete an appropriateness questionnaire by your stockbroker. WHEN CAN I TRADE COVERED WARRANTS? Covered warrants can be traded during the LSE market hours: between 08:05 and 16:30. WHERE CAN I ACCESS PRICES? You can access live prices from your UK stockbroker, the LSE, or the Societe Generale Exchange Traded Products website. Prices might be delayed depending on which website you use, but you can also call your stockbroker or Societe Generale representatives (SG Freephone line: 0800 328 1199). HOW CAN I SEEK INVESTMENT ADVICE? For advice, we recommend that you consult an appropriately qualified financial adviser. Societe Generale does not offer investment advice with respect to these products. Please be aware that nothing in this document constitutes advice on the merits of buying or selling a particular investment or exercising any right conferred by the warrants described. WHAT ARE THE TRADING COSTS? With covered warrants, a brokerage fee will normally be charged at the same rate as standard equity trading through your stockbrokers. However, you will not be charged the 0.5% Stamp Duty usually incurred on UK share purchases*. DO I FACE COUNTERPARTY RISK? Yes, these products are issued by Societe Generale Acceptance, a member of the Societe Generale group of companies. Any failure of Societe Generale Acceptance to perform obligations when due may result in the loss of all or part of an investment. WHERE CAN I LEARN MORE ABOUT COVERED WARRANTS? You can ask your stockbroker, seek independent advice or why not attend our complimentary workshops, held on a regular basis at the Societe Generale offices in central London? Go to www.sglistedproducts.co.uk for more information or to book your place. Representatives from Societe Generale will answer all your factual questions, and study materials will be provided. No investment advice will be given. On the Societe Generale exchange traded products website, covered warrant prices have a 15 minute delay or you can login and use the CW Price Tool, providing access to all SG covered warrants, with only a 1 minute delay. Societe Generale, in conjunction with the LSE, displays prices in Pounds and not in Pence. *Any statement in relation to tax, where made, is generic and non-exhaustive and is based on our understanding of the laws and practice in force as of the date of this document and is subject to any changes in law and practice and the interpretation and application thereof, which changes could be made with retroactive effect. Any such statement must not be construed as tax advice and must not be relied upon. The tax treatment of investments will, amongst other things, depend on an individual s circumstances. Investors must consult with an appropriate professional tax adviser to ascertain for themselves the taxation consequences of acquiring, holding and/or disposing of any investments mentioned in this brochure. Freephone 0800 328 1199 14 16
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SOCIETE GENERALE LISTED PRODUCTS Call: 0800 328 1199 Email: listedproducts@sgcib.com Web: www.sglistedproducts.co.uk Bloomberg: SGLP <GO> THIS COMMUNICATION IS FOR PROFESSIONAL CLIENTS AND SOPHISTICATED RETAIL CLIENTS IN THE UK This document is issued in the U.K. by the London Branch of Societe Generale. Societe Generale is a French credit institution (bank) authorised by the Autorité de Contrôle Prudentiel et de Résolution (the French Prudential Control and Resolution Authority) and the Prudential Regulation Authority and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available from us on request. Although information contained herein is from sources believed to be reliable, Societe Generale makes no representation or warranty regarding the accuracy of any information. Any reproduction, disclosure or dissemination of these materials is prohibited. The product described within this document is not suitable for everyone. Investors capital is at risk. Investors should not deal in this product unless they understand its nature and the extent of their exposure to risk. The value of the product can go down as well as up and can be subject to volatility due to factors such as price changes in the underlying instrument and interest rates. Prior to any investment in this product, you should make your own appraisal of the risks from a financial, legal and tax perspective, without relying exclusively on the information provided by us, both in this document and the Pricing Supplement of the product available on the website www.sglistedproducts.co.uk. We recommend that you consult your own independent professional advisors. Investors should note that holdings in this product will not be covered by the provisions of the Financial Services Compensation Scheme, nor by any similar scheme. The securities can be neither offered nor transferred in the United States. Any statement in relation to tax, where made, is generic and non-exhaustive and is based on our understanding of the laws and practice in force as of the date of this document and is subject to any changes in law and practice and the interpretation and application thereof, which changes could be made with retroactive effect. Any such statement must not be construed as tax advice and must not be relied upon. The tax treatment of investments will, amongst other things, depend on an individual s circumstances. Investors must consult with an appropriate professional tax adviser to ascertain for themselves the taxation consequences of acquiring, holding and/or disposing of any investments mentioned in this brochure. For more information: see the Terms and Conditions available on our website www.sglistedproducts.co.uk. DTP72286