Exercise / Conversion Ratio
How many warrants are needed to convert into one unit of the underlying share or index — directly affects the warrant's price and gearing.
By warrants.asia Editorial Team · Published July 20, 2026
What is the conversion ratio?
The conversion ratio (also called entitlement ratio or exercise ratio) specifies how many warrants are needed to convert into one unit of the underlying asset. A conversion ratio of 5 means five warrants represent the right to one unit of the underlying at the strike price. This ratio is fixed at the time the warrant is listed and does not change over its life.
The conversion ratio directly affects the warrant's price and per-unit payoff. A higher ratio means each individual warrant represents a smaller fraction of the underlying, so it costs less in absolute terms — but the payoff per warrant is also proportionally smaller. It's a scaling factor, not a measure of quality.
How the conversion ratio affects payoff calculations
At expiry, the cash settlement for an in-the-money call warrant is: (underlying settlement price − strike price) ÷ conversion ratio. For a put warrant: (strike price − underlying settlement price) ÷ conversion ratio. A call warrant with strike RM5.00, conversion ratio 4, and the underlying finishing at RM6.00 pays out (6.00 − 5.00) ÷ 4 = RM0.25 per warrant.
When comparing warrants on the same underlying, always normalize the conversion ratio to compare like-for-like. A warrant priced at RM0.10 with a conversion ratio of 10 is not 'cheaper' than one priced at RM0.50 with a conversion ratio of 2 — the underlying exposure per ringgit invested is what matters, and that's captured by gearing and effective gearing.
Common conversion ratios on Bursa Malaysia and HKEX
On Bursa Malaysia, conversion ratios for single-stock warrants commonly range from 2 to 10, depending on the underlying's share price and the issuer's pricing. Index warrants (HSI, HSTECH) on HKEX often have much larger conversion ratios — 10,000 or more — because the underlying is a large index number rather than a single share price. Always check the specific warrant's term sheet or listing document for the exact ratio, as it varies by issuer and listing.
FAQ
What is the conversion ratio in a warrant?
The conversion ratio (or entitlement ratio) is how many warrants convert into one unit of the underlying. A ratio of 5 means five warrants give exposure to one share — it's fixed at listing and scales the warrant's price and payoff proportionally.
Does a higher conversion ratio mean more leverage?
Not directly. A higher conversion ratio makes each warrant cheaper in absolute terms but also scales down the payoff per warrant proportionally. Leverage is better measured by gearing and effective gearing, which account for the conversion ratio alongside the underlying and warrant price.
Related terms
Explore further
See all terms in the full glossary, or try the pricing calculator to see exercise / conversion ratio in action.