Tuesday, 15 September 2015

Warrants: Turnover versus Outstanding Quantity

Turnover is the total units of a warrant bought and sold on a day.

Outstanding quantity refers to the accumulated units, or the accumulated overnight positions, held by investors (other than the issuer) at the close of trading.

Outstanding percentage is the portion held by investors of the total units of the warrant in issue.

Various scenarios and interpretations of the market.

Day Trader >>> Overnight Traders  -  Turnover >>> Outstanding quantity

On a trading day when the market is dominated by day trade investors rather than overnight traders, the turnover can be way above the increase in outstanding quantity.

All new positions held overnight - Turnover = Increase in outstanding quantity 

In contrast, if all the new positions of the day are held overnight, the increase in outstanding quantity will be equal to the turnover.

Day trade market - High turnover + Flat outstanding quantity

Normally, when a high turnover meets a flat outstanding quantity, what we have is a day trade market.
This may be a sign of a lack of confidence in the outlook for the warrant.

Market dominated by sell orders - High turnover + Fall in outstanding quantity

When a high turnover meets a fall in outstanding quantity, then the market is dominated by sell orders.
This may mean that the holders of a call warrant are selling on expectation that the underlying is topping out (or bottoming up in the case of a put warrant).

Players are upbeat about the market outlook - High turnover + Increase in outstanding quantity

When a high turnover meets an increase in outstanding quantity, the investors here are probably long-term players who are rather upbeat about the market outlook.

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