Warrants offer traders with access to leverage which allows them to gain exposure to the market in excess of their trading capital. This means that changes in the value of the underlying instrument result in a greater change in the value of the warrant. The leverage level varies between the different types of warrants and can range form negligible to significant. Generally, investment-style warrants offer less leverage than trading-style warrants.

Leverage has the ability to magnify trading profits and losses.

Certain types of warrants, such as Index, Basket and Currency warrants, allow traders the opportunity to profit from movements in a particular sector, selection of shares or currencies. This provides traders with the greater flexibility to diversify their portfolio with their available capital. 

Risk Management

Warrants can be used to protect the value of your portfolio. Put Warrants can be used as a cost effective and efficient way to protect your portfolio from negative price movements. Purchasing a put warrant locks in a selling price for the underlying asset such as a Share, Index or a Currency for the life of the warrant.

Income generation

Instalment Warrants offer traders the ability to generate an income. Instalments entitle you to the dividends (and any franking credits) paid on the underlying share. Because your capital outlay on an instalment is less than the cost of the underlying share, the income stream on the instalment is proportionally larger. Other investment-style warrants such as endowments may also help you to benefit from dividends.