Posted by valuelurker > 2017-05-11 00:08 | Report Abuse

Without implied volatility cant calculate options price what a bunch of donkeys dont know anything about options pricing dont simply say cant calculate or use the terms la damn obvious nuubs download some free model with inputs with no inkling of options models

Posted by livingston > 2017-05-11 13:45 | Report Abuse

Let's look at one of the famous Options Pricing Model available:

The Black-Scholes-Merton model makes certain assumptions:
• The option is European and can only be exercised at expiration
• No dividends are paid out during the life of the option
• Efficient markets (i.e., market movements cannot be predicted)
• There are no transaction costs in buying the option
• The risk-free rate and volatility of the underlying are known and constant
• That the returns on the underlying are normally distributed

You may refer more on: Options, Futures, and Other Derivatives, 8th Edition, Copyright © John C. Hull 2012 (pages 313-315).



There are few challenges by using Black-Scholes-Merton for Dancomech:

1. Company warrants is American and not European – Item 1 Not fulfilled
2. There is 30% dividends pay out committed by the Management – Item 2 not fulfilled
3. The Implied Volatility of an option is the volatility for which the Black-Scholes-Merton price equals the market price. Traders and brokers often quote Implied Volatilities rather than prices in RM.
4. When a regular Call Option is exercised the stock that is delivered must be purchased in the open market but when a warrant or executive stock option is exercised new Treasury stock is issued by the company. After the Options have been issued it is not necessary to take account of dilution when they are valued but company warrant yes.

With the limitations mentioned, to get a good FV is rather difficult. The price can be calculated once the warrant is already IPO. Options Pricing is more suitable in Trading Options.

Posted by livingston > 2017-05-11 14:06 | Report Abuse

Put/Call Parity Options Pricing defines the relationship that must exist between European put and call options with the same underlying asset, expiration and strike prices (it doesn't apply to American-style options because they can be exercised any time up to expiration)

- Company Warrants Eg. Dancomech is American Style as it can be exercised any time-

Posted by livingston > 2017-05-11 14:11 | Report Abuse

Cox-Ross-Rubinstein Method

The CRR model makes certain assumptions, including:

No possibility of arbitrage; a perfectly efficient market
At each time node, the underlying price can only take an up or a down move and never both simultaneously


Question to ponder: Is Malaysia Warrants are perfectly efficient that leaves no room for arbitrage? Each calculation of pricing is either up or down vs the price.

Suitable to be used in company warrants analysis in Malaysia?

Posted by livingston > 2017-05-21 16:23 | Report Abuse

For readers to know more as there is a comment given above suggesting on using Options Pricing to do a calculation of Fair Value for the company warrant:

If the subject of my sharing was referring to Call Warrant and not Company Warrant for Dancomech, then the idea of using Options Pricing is doable. Let's look at Black Scholes Merton:

Difference:

1. Call Warrants in Malaysia consists of European Style. So it fulfill the required condition by Black Scholes Merton Model.

2. When Call Option is exercised, there is no effect of dilution. Company warrants yes.

By using Black Scholes (Option Pricing) to calculate for the FV of Call Warrants is not perfect but it do eliminate 2 additional parameters required for analysis compared with using Black Scholes to analyze Company Warrants.

Most analysis that went wrong mainly because the user used the Wrong Base and the Wrong Multiple to build the Model and calculated wrongly for the Fair Value. The standard deviation will be high and the result will be less reliable. So, we have to be careful with using certain models to calculate. When we are not sure, it would be better not to forcefully build a model just to get a targeted FV.

Thank you

Posted by FlyFlewFlown > 2017-09-30 12:23 | Report Abuse

Hello Sifu,,,now making losses still want give excuses?
Warrant make money so what???
Mother drop like hell,,,,suddenly so quiet in the group???
Sifu level,,,kikiku

Posted by warchest > 2017-10-13 11:18 | Report Abuse

who is this Livingston? Sound like another Holland Self-professed sifu.

Posted by FlyFlewFlown > 2017-11-06 17:00 | Report Abuse

Is a brilliant Holland Sifu
Nice buy call by the way
Now hide inside cave licking wound!

Posted by warchest > 2017-11-06 17:20 | Report Abuse

rubbish analysis. too much theory but lost all the practicality. sound like an amateur analysis from Livingston

Posted by FlyFlewFlown > 2017-11-07 17:19 | Report Abuse

Where r u holland sifu 188& Kar Jun
Hiding inside cave???
Kikiki

Posted by FlyFlewFlown > 2017-11-07 17:19 | Report Abuse

Best pick by Bursa Blue Ocean: OCK-wa, TEKSENG,SYF,OWG,TUNEPRO,DANCO,MKH,CSCENIC
Good Job HUMBLE188,,,first class to Holland

Posted by FlyFlewFlown > 2017-11-11 17:03 | Report Abuse

Now Humble188 got one dog keep barking on bursa blue ocean
Good Job,,but won’t change the share price
So-high

Posted by FlyFlewFlown > 2017-11-13 16:47 | Report Abuse

Humblepie and Kar Jun totally disappeared from BBO
Nice job!

Posted by warchest > 2017-12-06 10:01 | Report Abuse

Humblepie and Kar Jun must be from syndicate of BBO. Doesn't make sense promoting at so high price