A warrant is a derivative investment instrument. Buying a warrant entitles an investor to buy or sell an underlying asset at a fixed price within a given period. The underlying asset can be in the form of stocks, market indices, currencies or commodities. Warrants are popular among individual investors in Hong Kong. Since they are priced substantially below their underlying assets, small investors thus may make a relatively big profit on a small principal. Investors are advised to base their warrant purchase decision on the price trend of the underlying asset. If that price trend goes up as they expect, they make a profit. It must be noted, however, that warrants are complex in terms of structure, operation and pricing. They involve higher investment risks. As such, warrants are not suitable for investors who are inexperienced or have low risk-tolerance, such as retirees.

All in all, warrants are a class of complex investment product involving substantial risks. Only knowledgeable investors who understand the workings of warrants and have a high risk-tolerance level should dabble in them. When in doubt, think twice about warrants.