Warrant Price, Premium and Gearing for a Four-Year Warrant|
The price of the underlying divided by the price of the call or warrant. The term, also called nominal gearing, is widely used in the United Kingdom warrant market and in other markets (such as the Japanese warrant market) which were developed on the United Kingdom model. The gearing ratio is of limited value in any analysis of option or warrant price relationships. A related concept, effective gearing is only slightly more useful. The latter is the traditional gearing measure multiplied by the call option or warrant delta. Effective gearing is also called elasticity. See also Premium (2) (diagrams), Premium/Gearing Ratio (diagram), Leverage Factor, Elasticity.