Like warrants, ETOs give you exposure to changes in the price of an underlying security without buying that security directly. But unlike warrants:
- ETOs have standardised terms set by the ASX, rather than the individual issuer. For example, equity option contracts are always written for parcels of 100 shares (and sometimes the possibility of corporate actions can affect the contract size), while warrants can be for any number of shares, depending on the terms set by the issuer.
- ETOs can be written by anyone, while warrants can only be issued by an approved warrant issuer, usually a bank.
- ETOs can be short sold.