Trading in derivative warrants (DWs) on the Thai market increased by a significant 56% in the third quarter from the same period last year on the back of highly volatile market.
The highly active trading on the stock index has driven trading of DWs because investors can make a profit from both upside and downside directions in the price of the underlying stocks, said Noppadon Duangthipnest, senior manager at Macquarie Securities (Thailand).
Buyers of DWs can invest in either downside or upside, said Mr Noppadon, "but when the market is more stable, it isn't popular as investors would rather invest in company stocks".
He said DW trading on the Stock Exchange of Thailand in the third quarter 2015 had a total value of 1.49 billion baht, or an increase of 56% from 956 million baht of the same period of last year.
He said there were many DWs launched this eyar, with most of them using the SET50 index as the underlying benchmark, in the so-called SET50DW. The SET50DW has become the most active DW product out of all other DWs, with a jump of nearly 230% overall in terms of trading value at 641 million baht in the third quarter from 196 million in the second quarter.
In September alone, the SET50DW's trading value represented 49% of the total DW market.
Mr Noppadon also attributed the growth to more Thai investors being educated in new products, resulting in their actively diversifying their portfolios to include new alternative investment products.
Mr Noppadon said Macquarie Securities (Thailand) launched its DW28 earlier this year, which is the top market-share gainer on the SET50DW this year with its trading value up 39.6% year-to-date.
The key factor for the success of Macquarie's DW product is its advanced technological trading platform, he said.
Mr Noppadon said it was not only in Thailand where DWs dominate trading activities; other markets are also experiencing the volatility especially in Asian countries where trading value of DWs have also increased significantly.
"Thai stock market is moving towards the similar trend and SET50DW will have trading value of more than 50% of total DWs in the near future," said Mr Noppadon.
According to Bualuang Securities, as of August, there was a total of 942 series of DW trading on the SET, comprising 688 series of derivative call warrants and 254 of derivative put warrants, with a total of 99 underlying stocks.
BLS is the top DW issuer on the SET with a 23.3% of total DW market share, with its products covering up to 70.6% of underlying stocks. In terms of value, it represents 50% of the total by 10 active issuers.