Hong Kong's warrant market offers a viable alternative for investors seeking to trade in crude oil, gold and silver. Since April, ABN Amro has led the drive to introduce commodity-related warrants, unveiling a batch of four linked to gold and crude oil. Another batch of silver warrants are due to be released soon. The new products mark a return to the warrant market for the Dutch banking group which withdrew in 2003. Heddy Tsang, head of distribution for private investor products, says the bank introduced the product in response to growing interest among warrant investors. 'We did an investment survey at the beginning of the year, and 10 per cent said they were interested in commodity warrants,' she says. 'ABN Amro is very strong in Europe for related warrants, so this is a perfect match.' The bank now ranks among a handful of financial institutions offering commodity warrants, estimated to comprise 2 per cent of new issues. Investors can access the warrant market through regular securities trading accounts. Minimum investment in commodity warrants is about $2,000 to $5,000, while brokers' fees and other charges are similar to trading local shares. 'This represent a new sector to warrant investors, most warrants are linked to indices, blue-chip stocks and currencies,' Ms Tsang says. Some believe the warrant market is safer for less experienced investors seeking to profit from rising commodity prices. In the futures market, the minimum crude-oil contract is 1,000 barrels, with a total value of about US$57,000. Hong Kong brokers require investors to put up an minimum margin of about 8 per cent or US$4,725. An additional margin call of US$500 would be required if the oil price were to decline 50 cents per barrel. In terms of gold, the minimum contract is 100 troy ounces, requiring an initial margin payment of US$2,025. 'With margin calls your loss is unlimited,' says Ms Tsang, who also conducts investor education forums at brokerages. 'For warrants your capital loss is limited to the initial capital outlay, with leverage of 4 to 5 times.' Warrants can be used to bet on either rising or falling prices on the underlying commodity. She advises warrant holders to sell out of losing positions and adhere to strict stop-loss controls. Calm markets can also hurt warrant prices as there is reduced chance of meeting the excise price. Warrant prices are also determined by time and volatility, with the value of the warrant depreciating as it approaches expiry. 'In flat market conditions warrants are very hard to make money from,' Ms Tang says.