What are CRWs?
A currency reference warrant (CRW) is a derivative; its value is derived from another underlying asset, in this case, an exchange rate. More specifically, its value is based on the change in the rand price of one unit of a specified foreign currency.
CRWs are available in both calls and puts, allowing investors to take advantage of their view of the future direction of the rand against a number of different currency crosses. Depending on the type of warrant traded, the investor has the right, but not the obligation, to either buy or sell the performance of the rand against a specified foreign currency at a specific rate (strike price) on a specific date (expiry or maturity date).
A CRW’s intrinsic value is determined from the difference between the underlying exchange rate and the strike price. It is the amount that the warrant is worth if it had to expire on that day. If the CRW does not have any intrinsic value at maturity, the loss incurred is the initial amount invested (the premium).
CRWs are cash settled in rands, which means that no transfer or settlement of foreign currency occurs. CRWs trade in a liquid secondary market where investors may enter or exit their warrant positions with ease. They are ideal for investors who understand the product and the risks associated with its gearing.
Why trade CRWs
CRWs are listed on the Johannesburg Stock Exchange, enabling investors to trade currency as an asset class and thereby take advantage of either a positive or negative view of the future direction of the rand against other major currencies. The specific benefits of trading CRWs include:
- Benefitting from currency fluctuations
- Taking advantage of your view of where the rand will be trading against a foreign currency (for example, the US Dollar) in the future
- Diversifying your portfolio by adding currency exposure
- Hedging against adverse movements in the rand
- Trading with liquidity provided by Standard Bank
- Leveraging or gearing your exposure to an underlying exchange rate.
In addition, CRWs do not incur securities transfer tax (STT), and no margining process applies (as with trading currency futures). Therefore, no daily settlement of profits and losses takes place.
We offer an intermediate level half-day derivatives course.
Existing clients can log into the platform to check course topics and details, upcoming dates in your city, and to make a booking.
New clients please phone our call centre for further information.
New clients: Click here to register now with Standard Online Share Trading.
Existing account holders: To trade CRWs, please:
2. Click on the other products menu
3. Select CRWs registration.
Download the brochure which explains in detail how Currency reference warrants work and how to get started trading them