Hi all, I m a newbie in warrant. In Malaysia when and how we actually exercise the warrant and convert to stock? Anytime or during specified time near the expiry of the warrant?? tqvm
One of the main things to look for buying warrant is, yes, the premium measured by Pre=(exercise price+Warrant price)/underlying share price-1
Of course the lower the premium the better as if you can buy warrant at lower price, surely you have better chance to make money. How much the premium is considered cheap or expensive? Hard to say because the other important thing is time, how long before the warrant expires. Of course if the time is long, there is higher probability that the underlying share can go higher and out-of-the-money warrant becomes deep in-the-money and hence the better chance in making money.
Few punters realize that there is another very important determinant of the price of warrant, the volatility of the underlying share. Figure this. If the volatility if high, meaning move up (and down) by big gap of the underlying share will provide better chance for the warrant to realize its value (and hence price) and investors (or punters)have better chance to make money. A 40% volatility is worth a lot more than one with 15%.
Not to forget that dividend yield also affect (adversely) the price of warrant as warrant holders are not entitled for the dividend. for a company which is used to pay high dividend, be sure that is taken into consideration.
How to price a warrant. if you are interested, go learn some stochastic calculus and see how the Nobel prize Black-Scholes Option Pricing formula is derived. Try understand what is Brownian motion and log-normal distribution, volatility smile and volatility surface.
Oh yeah, the other thing is you may not need to know all these boring stuff. Just look at the chart or based on demand and supply to determine the pricing and make a punt. Many people make money that way too.
Not sure if anyone here read from the newspaper, basically, the colomnists think that GKH has no confidence that the mother share will cross above 45sen, that's why he sold almost all of his warrants.
i rather read it as he doesn't want the shares to climb too fast, in which people can exercise the warrants, therefore dilute earnings!
there is another article posted by Tan KW before (the author of the blog being auguri or something like that). They are reading too far in between the line what GKH is doing!
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
KC Loh
13,701 posts
Posted by KC Loh > 2013-08-28 16:44 | Report Abuse
the way warrant is pushing, some news coming up. used to be a lot of roadblocks every half sen