Covered warrants: Spread bets with a safety mechanism

Spread betters can take advantage of price swings and use stop-losses to limit potential damage. But there's an alternative that comes with a built-in safety mechanism – the covered warrant.

Spread betters can take advantage of price swings and use stop-losses to limit potential damage. But there's an alternative that comes with a built-in safety mechanism the covered warrant.

Volatility has been lying low. The Chicago Board of Trade's VIX index a favoured measure of volatility for equities, based on S&P 500 option prices has hovered around 17 having hit multiples of that during the worst of the credit crunch. But this calm may not last. Central banks have yet to work out how to withdraw huge stimulus packages. China's rapid growth is showing signs of stalling.

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