One of the most common mistakes I see among Malaysian traders is confusing structured warrants with company warrants — or assuming they work the same as options traded on US exchanges. I titled one of my Nanyang Siang Pau columns "认股权证 冯京当马凉" (Warrants: Confusing Apples and Oranges) precisely because this confusion leads to costly trading errors.
As the only specialist in Malaysia who has developed both over-the-counter (at OCBC Bank) and exchange-traded (at Bursa Malaysia) derivative products, I'll break down the critical differences you need to understand.
What Are Structured Warrants?
Structured warrants (结构性凭单) are derivatives issued by third-party financial institutions — such as investment banks like Macquarie, Kenanga, RHB, CIMB, Maybank, and Hong Leong. They give holders the right to buy (call) or sell (put) an underlying asset at a specified price before expiry.
Key characteristics:
- Issued by financial institutions, NOT the underlying company
- Cash-settled at expiry — no shares change hands
- Designed for short-term trading (typically 3-12 months lifespan)
- Market maker provides continuous bid/ask prices
- Available as both call warrants (bullish) and put warrants (bearish)
- Your maximum loss is limited to the premium paid
For a deeper dive, read What Are Structured Warrants in Malaysia?
What Are Company Warrants?
Company warrants (公司凭单) are issued by the company itself, typically alongside rights issues to encourage investors to subscribe. When exercised, company warrants are converted into new shares of the company.
Key characteristics:
- Issued by the company as a sweetener for rights issues
- Converted to shares when exercised — causes dilution of existing shareholdings
- Longer lifespan — often 3-10 years
- No market maker — liquidity depends entirely on market supply and demand
- Only available as "call" type (right to buy shares)
- No put warrants available
- Structured Warrants
- Company Warrants
- Options
Structured Warrants vs Company Warrants: Side-by-Side Comparison
| Feature | Structured Warrants | Company Warrants |
|---|---|---|
| Issuer | Third-party financial institutions | The company itself |
| Settlement | Cash-settled | Physical delivery (new shares issued) |
| Purpose | Short-term trading & hedging | Fundraising incentive |
| Trading timeframe | Short-term (3-12 months) | Medium to long-term (3-10 years) |
| Types available | Call AND Put warrants | Call only |
| Share dilution | No dilution | Dilutes existing shares when exercised |
| Market maker | Yes — issuer provides liquidity | No — depends on market supply/demand |
| Underlying assets | Stocks, indices (incl. HSI), ETFs | Only the issuing company's shares |
| Stamp duty | Exempt | Subject to stamp duty |
What About Options? Why Malaysia Uses Structured Warrants Instead
If you're familiar with US markets, you might wonder: why doesn't Malaysia just have options?
The key difference is that Bursa Malaysia does not offer US-style exchange-traded stock options. While Bursa does offer index futures and options (FKLI/OKLI) through its Derivatives Exchange, there are no standardised stock options for individual Malaysian equities.
Structured warrants fill this gap. They provide Malaysian traders with:
- Leveraged exposure to individual stocks and indices
- The ability to profit from both rising (calls) and falling (puts) markets
- Defined risk (maximum loss = premium paid)
- No margin requirements — pay for warrants in full upfront
Structured Warrants vs Options: Key Differences
| Feature | Structured Warrants (Malaysia) | Options (US-style) |
|---|---|---|
| Writer/Seller | Only licensed financial institutions can issue | Any trader can write (sell) options |
| Buyer's risk | Limited to premium paid | Limited to premium paid (for buyers) |
| Seller's risk | N/A — retail traders cannot sell/write | Potentially unlimited for naked sellers |
| Standardisation | Each warrant has unique terms set by issuer | Standardised strike prices and expiry dates |
| Liquidity source | Market maker (issuer) | Open market + market makers |
| Settlement | Cash only | Physical or cash depending on contract |
| Margin required | No — full payment upfront | Margin required for selling options |
| Strategies | Buy calls, buy puts, hedging | Many complex strategies (spreads, straddles, iron condors, etc.) |
The biggest practical difference: you can only BUY structured warrants in Malaysia — you cannot write (sell) them. This actually simplifies things for retail traders and eliminates the risk of unlimited losses that comes with selling naked options.
Structured Warrants
- Buy only — cannot write (sell)
- Seller's risk: N/A for retail traders
- No margin required
Options
- Any trader can write (sell)
- Naked sellers face potentially unlimited risk
- Margin required to sell
Which Instrument Is Right for You?
Choose Structured Warrants if you:
- Want leveraged exposure to Malaysian stocks or the HSI index
- Prefer defined risk (can never lose more than premium paid)
- Are comfortable with short-term trading (days to weeks)
- Want to profit from both bullish and bearish views
- Need to hedge an existing stock portfolio
Choose Company Warrants if you:
- Have a long-term bullish view on a specific company
- Want the option to convert to actual shares
- Are comfortable with lower liquidity
Consider Overseas Options if you:
- Want to implement complex multi-leg strategies
- Want to earn premium by selling options
- Are already trading US or Hong Kong markets directly
Warren Mak's Perspective
"Structured warrants are one of the best trading instruments on Bursa Malaysia. They offer leverage with limited risk, and you can profit in both rising and falling markets. For Malaysian traders, structured warrants are the most practical way to trade with leverage." — Warren Mak, Nanyang Siang Pau
After 32+ years in the securities and derivatives industry — including developing structured products at OCBC Bank and overseeing their regulation at Bursa Malaysia — I can say that structured warrants, when traded properly, offer an excellent risk-reward profile for educated traders.
The key is education. Learn how they work, understand the pricing factors, and never trade with money you can't afford to lose. Start with my step-by-step trading guide and warrant selection criteria.
Frequently Asked Questions
Does Malaysia have options trading?
Malaysia does not have US-style exchange-traded stock options. However, structured warrants serve a similar function, offering leveraged exposure with defined risk. Bursa Malaysia does offer index futures and options (FKLI/OKLI) for the KLCI index.
Can I write (sell) structured warrants in Malaysia?
No. Only licensed financial institutions can issue structured warrants. Retail traders can only buy them. This limits your maximum risk to the premium paid — you can never owe more than you invested.
Are structured warrants the same as company warrants?
No. Company warrants are issued by the company (usually with rights issues) and convert to shares. Structured warrants are issued by third-party financial institutions, are cash-settled, and are designed for short-term trading. They have very different risk profiles.
Which is better — structured warrants or options?
For Malaysian traders, structured warrants are the most accessible leveraged instrument. They offer defined risk, leverage, and dual-direction trading. Options offer more complex strategies but are not available for individual Malaysian stocks on Bursa Malaysia.
