Premium
How much extra, in percentage terms, you pay for a warrant above its intrinsic (exercise) value — compensation the issuer charges for time value and leverage.
By warrants.asia Editorial Team · Published July 20, 2026
What is the premium on a structured warrant?
The warrant premium is the extra amount, expressed as a percentage, that a warrant costs above its intrinsic value — the difference between the underlying's current price and the strike, adjusted for the conversion ratio. If a call warrant's intrinsic value based on the underlying price would be RM0.20, but the warrant trades at RM0.35, the extra RM0.15 is the time value component, and the premium percentage captures how 'expensive' the warrant is relative to the underlying.
Premium compensates the issuer for two things: the remaining time value (the underlying could move further in-the-money before expiry) and the leverage embedded in the product. A higher premium means the underlying needs to move further in your favor before the warrant position breaks even at expiry.
How premium relates to break-even
Premium and break-even are two sides of the same coin. The break-even point is the underlying price at which the warrant holder neither profits nor loses at expiry — for a call warrant, it's the strike price plus the premium paid (adjusted for conversion ratio). A warrant with a high premium has a higher break-even, meaning the underlying needs a larger move just to cover the entry cost. This is why premium is crucial when comparing warrants: a warrant with higher gearing but also higher premium may not actually outperform a lower-gearing, lower-premium warrant unless the underlying makes a very large move.
Time value erosion and premium
As a warrant approaches expiry, its time value — and therefore its premium — erodes. This erosion accelerates in the final weeks before maturity (see time decay). Out-of-the-money warrants near expiry can have a premium that is essentially all time value and no intrinsic value, meaning the entire premium is at risk of disappearing as expiry arrives. Monitoring how much of the warrant's price is premium (versus intrinsic value) helps gauge how much of the position is exposed to time decay alone.
FAQ
What does premium mean in warrants?
The premium is the percentage above intrinsic value that a warrant trades at — it represents the time value and leverage cost. A higher premium means the underlying needs to move further before the position breaks even at expiry.
Is a lower premium always better?
Lower premium means a lower break-even, which is generally favorable. But very low premium usually comes with deep in-the-money warrants that have lower gearing. The trade-off between premium and gearing depends on the size of the move you expect in the underlying.
Related terms
Explore further
See all terms in the full glossary, or try the pricing calculator to see premium in action.