Foreign exchange warrants settlement at maturity

Similar to the index or single stocks linked warrants, FX warrants will be settled with cash value only when the warrants is in-the-money.

Formula is as follows:
Call warrants = (Spot Rate - Strike Rate) X Currency Amount / Divisor
Put warrants = (Strike Rate - Spot Rate) X Currency Amount / Divisor

In the formula, the "Spot Rate" is the settlement price of the underlying asset; The "Strike Rate" is equivalent to the "Strike Price" of the Warrant; "Currency amount" refers to the exchange rate of the base currency against the quote currency (Hong Kong dollar).

If the quote currency of the currency pair is already HKD, there is no need to convert it back to HKD when calculating the settlement amount of the FX warrant.

Therefore, you can refer to the following simplified formula:

Call warrants = (Settlement Price - Strike Price) / Divisor
Put warrants = (Strike Price - Settlement Price) / Divisor

The term “Settlement Price” in this context refers to the exchange rate of the currency pairs at or about 2 p.m. Hong Kong time on the Valuation Date. This rate is determined by the Issuer, referencing the mid-quote as per the rate of the on Bloomberg page BFIX.

Example: CNH/HKD call

Strike Rate (Strike price) is HK$1.1, the spot exchange rate (settlement price) on the Expiry Date is HK$1.15, and Divisor is 1 to 10.

Applying the above formula, the cash settlement amount is:
(1.15-1.1) / 0.1 = HK$0.5

If investors have any questions about the spot exchange rate, they can call the issuer for enquiries.

The above information provided by J.P. Morgan Securities (Asia Pacific) Limited ("J.P. Morgan") is for information and discussion purposes only and is not intended as an offer, invitation, inducement, advice, recommendation or solicitation for the purchase or sale of any above-mentioned listed structured products or financial instruments nor does it constitute a commitment by J.P. Morgan or its affiliates ("J.P. Morgan Group") to enter into any transaction. Past performance is not indicative of future results. There can be no assurance that future results or events will be consistent with any opinions, forecasts or estimates herein.
FX warrants (or currency warrants) are non-collateralised structured products. The price of the structured products may fall in value as rapidly as it may rise and investors may sustain a total loss of their principal invested. J.P. Morgan does not act as a fiduciary for or an advisor to any investor and is not responsible for determining the legality and suitability of an investment in any products or financial instruments by any prospective purchaser or existing holders. Investors must make their own risk assessment and where necessary, seek professional advises. Investor should not invest in these structured products unless they carefully read and understand the terms and conditions, risk factors and other information as set out in the relevant listing documents, and fully understand the features of the structured products and are willing to assume the risks associated with them.