Warrants offer the chance for high profits on the one hand, but also have correspondingly high risks on the other. The reason is the leverage effect, i.e., price movements of the underlying asset can swing disproportionately in one direction or the other and this leads to corresponding gains or losses. The underlying for a warrant can be a stock, an index, a commodity, or a currency. Unlike turbos, warrants do not have a knock-out. But even with a corresponding market opinion about the future price movement of the underlying, it can come to misjudgments and resulting losses.

The core of every warrant is the option right. The option right certifies a right, but not an obligation, to buy (call option or call) or sell (put option or put) a specific underlying asset, e.g., a share, at a previously agreed price. This means that you have the right but not the obligation to buy (call) or sell (put) at a previously agreed price within a certain timespan. This pre-agreed price is called the strike price.

If you expect prices to rise, you buy a call warrant. The chances to earn with call warrants are theoretically unlimited. With put warrants, you profit from negative price developments of the underlying asset. Thus, put warrants can classically also be used to hedge existing securities positions. With put warrants, on the other hand, there is a "natural" profit limit because the price of an underlying can never fall below zero. The maximum risk of loss with warrants is always limited to the capital invested.

The exercise type determines when you can exercise the option. If it is possible to exercise the option right at any time during the term, this is known as an American option. If the option can only be exercised at the end of the term, it is a European option.

Each warrant has five features: the underlying, the ratio, the strike price (exercise price/strike), the term, and the exercise type (American or European). The value of a warrant is determined by the intrinsic value and the time value and rises respectively falls with the development of various influencing factors, in particular volatility.

By exercising the option right, you can demand repayment from the issuer during the term. In practice, instead of delivery of the underlying, the difference between the price of the underlying on the exercise date and the strike price is usually paid as cash settlement. If the option right has not been exercised, this difference is automatically paid on the maturity date. If the price of the underlying at maturity is at or below the strike price in the case of a call warrant or at or below the strike price in the case of a put warrant, there is no repayment, and a total loss is incurred.