Instalment warrants acceptable as collateral

The Options Clearing House (OCH) has recently allowed some instalment warrants to be used as security to cover margin accounts for option positions. Due to the geared nature of warrants these securities were previously not acceptable to the OCH. The criteria that the instalment warrants must meet are :

– they must be issued over current exchange traded option shares;
– they must be broker sponsored;
– Instalment warrants must be withdrawn 5 days before expiry; and
– have a prepayment of 50% or more of the underlying shares.

Additionally, the OCH will apply a 40% buffer, such that your warrants will be valued at 40% less than their market price for collateral purposes.

In the same notice the OCH has also allowed margined stock to be used as security for the purpose of writing covered calls.

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