ALEXANDRE HOUPERT<br /><strong>HEAD OF LISTED PRODUCTS UK, SG CORPORATE & INVESTMENT BANKING</strong><br /><br />WHEN markets are choppy, clever traders look for new ways to diversify their tactics. One of the great things about covered warrants is their adaptability, which makes them a good addition to your trading armoury right now.<br /><br />For example, there are plenty of new covered warrants on single stocks such as the mining stock Xstrata and the retail stock Marks and Spencer. Also, according to Andrew McHattie writing in Strike magazine, banking and finance are two sectors which have done well over the last quarter. Barclays, Lloyds Banking Group, Royal Bank of Scotland, and HSBC have all been among the market leaders, recovering from a low base in most cases. Insurance companies have also performed well recently, and covered warrants are available on Legal & General and Prudential.<br /><br />Of course, covered warrants aren’t all about single stocks and FTSE 100 covered warrants are very popular. One of the advantages of this tool is that you can trade on international indices too, such as the Dow Jones Euro Stoxx 50, S&P 500, Nikkei 225, Nasdaq 100 and Dax are also available. Also available are currency pairs and hard and soft commodities.<br /><br />The SG FTSE 100_ 4800_18 Sep 09_Call covered warrant (LSE code: SC18) has doubled in value over the past month, rising from £0.04 at the start of July to £0.0770 as of 29 July, which generated positive returns and provided a gearing of 19.6. In contrast, a FTSE 100 put covered warrant with the same attributes would have decreased in value. The market size on the SC18 covered warrant – ie, the minimum number of securities the LSE requires issuers to quote prices for – is 500,000, with a strike price at 4,800 and a maturity date fixed at 18 September 2009.<br /><br />But, covered warrants can be (and usually are) bought and sold back into the market during their life at current market value, provided by a continuous bid-offer spread. Whatever your investment aims, covered warrants are a useful addition to a trader’s toolbox.