Warrants: Days to Maturity

Warrants can be classified accordingly to the length of their remaining days to maturity.

Short term warrant:  Warrant with less than 3 months to maturity
Medium term warrant:  Warrants with 3 to 6 months left to maturity
Long term warrant:  Warrants with more than 6 months running to maturity.


Whether it is long-term or short-term, ITM or OTM, a warrant is after all a leveraged investment instrument.
Be cautious in funds allocation and stop-loss arrangements.

Do not get carried away by the potential return without considering your risk tolerance.


For example:

A general investor may consider a medium-term warrant with around 3 months running to maturity and a strike price around 5% above or below the underlying price.

More aggressive investors may go for OTM warrants with a shorter maturity.

For conservative investors, they may choose ITM warrants with a longer maturity.



The warrant price tends to be positively related to the length of maturity.

In theory, the longer the maturity, the more room for changes in the underlying price will be.

Given the greater chance for the warrant to be exercised, the warrant price will tend to be higher.

No matter for call warrants or put warrants, the warrant price tends to be positively related to the length of maturity.

Besides, a warrant expiring in 6 months is less affected by time decay than one expiring in 3 months.

Warrants with a longer maturity will see their time values fall slower, while those with a shorter maturity will see their time values fall faster.