“This is a particularly interesting and relevant product in today’s political climate,” said David Lake, director of UK warrants at SG in London, “particularly when set against the background of the decisions faced by the UK surrounding its potential entry into the euro and our historic alignment with the US.”
Lake added that UK citizens could also use the products to hedge future purchases from the eurozone. “Say I want to buy a villa in Ibiza, then I could use these to guarantee the price I would have to pay,” he said. Small businesses could also use the instruments for cost-effective hedging, added Lake.
Goldman Sachs launched warrants linked to the UK residential housing market last month, while in February it launched contracts linked to the gold spot rate and an oil futures price. SG and Goldman Sachs are the two biggest participants in the UK warrants market, which was launched initially with only equity underlyings by the London Stock Exchange in October last year.