Last night I went to RHB for a talk ... about RHB's latest products(screeners) and 'Call Warrants'. The CW-talk was by OCBC, actually. They are new-kids of issuing CW with 8 listings so far.

I met : A reader, who recognised me when we took a lift together to 11th floor. Kelvin, who is attached to RHB now. JT, a real estate agent who has his own facebook page and I did not even really realised I was added in his group!! AT, my tratle(of cohort-6) and a CNX-member ... who told me that they have replaced the previous your trainer with a 'better' one recently. Well, such a place is a place to get some interactions and sharing of knowledge and ideas.

Screeners : I have to admit that RHB's latest screener is good as they placed FA and TA together. Yes, these days ... we do many traders who do look into both of the world. No longer we argued about FA vs TA. Of coz we always have people who will only preach about FA or TA, and condeming the other side(to justify that they are they best ... those egoistic and obstinate/stubborn ones). Anyway, the screener is 'free' till end of June ... and yup, nothing is free, ok?

Points: AirAsia partnering with RHB, they are giving 'hottie' points ... each time you trade with RHB, they give you points ... and after collecting the points, you can get a free AirAsia ticket. Now ... everyone can trade and fly. haha.

Undervalued : Through the screener for some fundamental's criteria, RHB is deemed to be undervalued for a long term investors. Well, RHB is being used as example ... by RHB. Ironic.

Then ... the next session is talking about 'call warrants'. There are so many of them there ... I do wonder who are actually trading/punting into these risky instruments. Let me share a little about the RISK, as most of those issuers will only tell you more of rewards. We all know why people willing to punt into call-warrants, right? Yes, the very HIGH profits ... came with HIGH risk that majority do not and could not fully understand.

There is one young guy sitting next to me and said he is 'new' to market. So, I advised him ... do not touch call-warrants, no matter how much that guy in-front promoting them. In general, do not buy what you don't know.

Risk #1 : Expiring in short period of time. Most of the call-warrants are short term ... 6 months to a year tenure. Once it expired, you will get NOTHING as almost ALL the structured warrants in KLSE is 'European style'(cash settlement). So, the risk is too high to buy-n-hold. Believe me, very likely it WONT be in money. You lose it all when it expires. That is the main risk.

Risk #2 : Many of these instruments could not be traded ... no liquidity, no volume. Yes, only you and the market-marker(the issuer). Guess what ... when market or the underlying mother share going against you, you will lose hugely as you could not be able to sell, especially when the expiry date nearing ...

Risk #3 : Lacking of knowledge and experience in trading these could created a huge emotion swing!! One day up 30%, next day up another 30%, the next few days ... no volume to trade and if you thought you are a genius to gain 60% in two days, it gaps down 50% the next week ... and slow death ... moving lower. Once you cut-huge-loss, it shot up another 40% only for you to chase ... and the emotion swing continues.

I could point out a few more reasons WHY majority in markets, especially newbies and novices should NOT trade call warrants but I think it will fall to deaf-ears. In fact, I will be seen as being jealous of their huge gains. OUCH.

I stood up to correct him during his talk when he kept mentioning of exercising your call-warrants to mother share. You COULD NOT do such ... it is cash settlement and you have to wait for the expiry date, to settle with the bank-issuer ... using CASH. These are not company warrants. By the way, if you buy a good fundamental and dividend stocks, they do not expire and continue to give you dividends. Buying these call-warrants is GAMBLING and PUNTING. Just dont touch if you dont know ... but I know many of them get too excited about the high leveraged instruments. I was a newbie and novice(still am) too before, ok?

He also used the term 'invest' in call-warrants ... it is NOT invest. We may allow the term 'trade' but I prefer the right word ... punt or 'tikam'. Haha.

He shown the basic calculations such as premium, gearing, delta ... and majority could not understand such calculations. I could recommend Alan Voon's book. Buy that ... read few times, and after 2-3 years in market ... perhaps, one may want to check on warrants? Good luck.

Yes, I am very discouraging most of people to go into call-warrants. There are simply too many things to learn about if we do not want to get badly burnt. Choice is yours, anyway.

There are only two way about it ... either you win(profit) or you lose. I have reminded many times ...in my group, that 80-90% of those in markets losing or lost money. WHAT makes you think that we could be the top 10-20% of those in market profitting? No sense ... no common sense ... going into markets without knowledge, no expreinces ... straight away want to gain hugely, punt into call-warrants ... after winning hugely, thinking he is a god-of-stocks ... and continue to gamble, and will eventually lose all back to markets and more. heard of such stories? I do.

Well, I would like to thank him for giving up some revisions on the calculation part, especially the effective gearing part. Just don't promote it to those majority. It is too risky for them ... they even lose money trading AirAsia ... how to handle AirAsia-cw?

I do hope Bursa or SC will educate more traders and investors. That is my hope ... that one day, more of those in markets could understand RISKS. Dont talk about profit first, ok?

Another example I gave my tratles last weekend ... you are new in your company. You were excited that you 'passed' the interview ... you get into your job, totally new ... and you are thinking of increments and bonuses in the first week of your job?! THINK ... dont you think so it should be ... doing all the donkey-works, extra efforts ... going extra miles, doing what others NOT doing(in a smart way), gaining experiences ... THEN only ONE DAY, we might think about rewards from the company? If you have done well and the company does not done well or did not appreciate your efforts, the experiences you gained could be taken as a stepping stones to move to a better company, right?

THINK ... as thinking needs brain. Mind you, majority of those losing money in markets DO NOT use common sense. Somehow, we are good in our jobs, we spent years in college and universitys acquiring the paper-qualifications(license to work) ... but ... well ... we do not need any qualifications to buy a call-warrant the next morning, right? Unless you are below 18?

Enough said .. need to check on markets and my open positions.

Good luck in your punting ... I mean, investing.

TEH