Derivative warrants (DWs) are gaining in popularity among investors seeking big profits, with trade value shooting to 200 billion baht this year from 60 billion in 2012.
Kesara Manchusree, executive vice-president of the Stock Exchange of Thailand, said DW trading grew as average daily trade volume on the SET climbed to 52 billion baht, up from 30 billion in 2012.
DWs are issued by a third party and offer rights to buy the underlying security in the future at a pre-determined price, quantity and period specified by the issuer. DW trading is normally quite active during a market's upward trend.
DWs represent 1.7% of the SET's overall trade value. By comparison, the figures are 20-30% for Hong Kong's stock exchange, 5-10% for Taiwan's and 1-5% for Singapore's.
"DW trading in the Thai market has high growth potential because investors can invest a small amount of money and get a high profit as in futures trading," said Mrs Kesara.
"In the Thai market, DW trading will grow significantly from now on, but I don't think it will be as much as the Hong Kong market."
Eleven out of 40 securities companies offer DWs, but the ones issued by a handful of firms are the most popular.
Bannarong Pichyakorn, managing director of Bualuang Securities (BLS), the market leader in DWs, said his firm handles 60% of DW volume on the SET. Most DWs issued by BLS have SET50 stocks as underlying assets.
He said the key is to issue DWs with highly liquid underlying assets that attract investors. The DW price should be set at a proper level, while issuers and market makers should have a strong financial position and the ability to boost trade liquidity.
Mr Bannarong said BLS has a training programme and research papers to teach DW investing.