Omega is one of the dynamic coefficients for options and represents the leveraging effect of a warrant. Omega can be calculated by multiplying the leverage factor by delta. Hence a warrant with a leverage factor of 10 and a delta of 0.6 has an omega of 6. The price of the warrant would therefore move by roughly 6% if the underlying instrument rose or fell by 1%. As is the case with all such coefficients, omega is merely a theoretical calculation because it can change immediately with every tick of the underlying instrument. Moreover, it has to be borne in mind that for options/warrants with a very small delta (i.e. they are way out of the money) the meaningfulness of the various coefficients lessens significantly because in such instances the value of the warrant is influenced almost exclusively by changes in the implied volatility of the underlying instrument.
A standardised option confers the right to buy (call) or sell (put) a specific amount of a specific underlying instrument at a specific price at a specific point in time (European-style option) or at any point during a specified period of time (American-style option). Warrants are essentially a securitised form of standardised options. They are usually traded on a securities exchange and are therefore easily accessible for private investors.
The price an investor pays for the purchase of an option is referred to as a "premium".
|Out of the money
A call option or call warrant is "out of the money" when the current market price of the underlying instrument is far below the strike price. A put is "out of the money" when the underlying instrument is trading clearly above the strike price.
Outperformance certificates enable investors to profit disproportionately from a price increase in the underlying instrument that exceeds a predetermined level. The extent to which the outperformance above this threshold actually is at maturity is determined by the "participation rate". The risk of loss is not greater than that of a direct investment in the underlying instrument, however the investor foregoes the receipt of a dividend.