Posted by Mat Cendana > 2012-11-21 09:01 | Report Abuse

TM-CV offered at 0.08 by OSK. Now why would anyone want to buy this when -CU offers a better deal, and at 0.04??

CV - Ex. 6.00; Ratio 6; Expiry 26/8/13
CU - Ex. 6.00; Ratio 4; Expiry 30/9/13

Posted by passerby > 2012-11-21 09:15 | Report Abuse

TM-CU still have advantages on price sensitively to underlying ( lower conversion ratio) & 1 month longer lifespan

TM-CV - I doubt traders will choose CV over CU unless if it is trading at attractive premium or discount

Posted by passerby > 2012-11-21 09:20 | Report Abuse

but now doesn't seem like a suitable time to enter CWs

Posted by Mat Cendana > 2012-11-21 09:30 | Report Abuse

Too late. Already bought CU at 0.04. Instead of punting, I've become a `semi-investor' with this one:-) The long expiry date makes this a cheap entry to TM. I'm okay about not getting dividends - capital appreciation is the goal.

Posted by kcchongnz > 2012-11-21 13:47 | Report Abuse

Which is the best TM call warrant to punt?
Yeah why would people buy CV when its premium at 19.2% is so much higher than CU, and CU has a higher gearing of 34 times compared to 12 times of CV? CU also has a longer expiry date. Yes the issuing bank OSK for CV is treating punters as stupid fools. The table below show prices on the morning close on 21 November 2012.
TM 5.41
Warrants Price Expiry date Premium Gearing
CT 0.100 31/07/2013 4.5% 11.4
CU 0.040 30/09/2013 13.9% 33.8
CV 0.075 26/08/2013 19.2% 12.0
CR 0.325 31/01/2013 1.0% 4.4
CS 0.145 31/01/2013 1.2% 9.3

Actually the safest bets are CR and CS with just 1% premium. They just need the underlying share TM to go up by just 1% to 5.47 by the expiry date two more months to go, punters who have bought CR and CS at these prices would make profit when settling. With the same expiry date, CR has a slightly lower premium but for punting I prefer CS because of its higher gearing. Whereas for CU, TM has to go up by 14% at settlement date then only can make money. 14% rise in 10 months is tougher though not difficult. Moreover TM can move up and down and one can sell off the call warrants any time before expiry with profit. The risk and reward of the warrants are shown below.
Uly Price 5.41 5.47 5.65 5.97 6.16 6.75
TM 0.0% 1.1% 4.5% 10% 14% 25%
CT -51.4% -38.8% 0.0% 66% 106% 231%
CU -100.0% -100.0% -100.0% -100% 0% 369%
CV -100.0% -100.0% -100.0% -100% -64% 67%
CR -4.4% 0.5% 15.4% 41% 56% 104%
CS -11.0% -0.7% 31.0% 86% 118% 220%

You can see that CU and CV are risky because if TM does not go up by 14% to at least 6.16, you lose everything at expiry. But the reward is high if TM can go up to 6.75 as given by MIDF investment analyst. The profit at settlement is 369%! The reward for the safer warrants CS and CR is lower but their risk is lower too as even if TM does not go up at expiry, the loss for CS is only 11% as shown.
Overall CT with 8 more months to expire may be the best punt as it is a balance between safety and reward. TM just need to go up by 4.5% only to 5.65, I will be making money for CT already. And if TM go up more than 6.75, I can make a few hundred percent profit too.

Posted by Antz78 > 2012-11-21 14:08 | Report Abuse

Thanks kcchongnz for the detail explanation on the CWs..
Appreciate it man...
Now I understand a little bit more on the premium side.
However, on the gearing side, what is it implying to and why the higher the better ?
Sorry, still a novice.. :)

Posted by tradersam 56 > 2012-11-21 14:22 | Report Abuse

Great sharing MC & kcchongnz. Thanks

Posted by Mat Cendana > 2012-11-21 14:29 | Report Abuse

Great analysis, kcchongnz! The reason for my choosing CU over the others: 1) I'm comfortable with the premium and gearing. 2) Better volume.

Despite it having a higher bar to clear as compared to CT, I feel it's achievable. Might not look so at the moment, with TM on a downtrend (which I think has bottomed) and a gloomy mood hanging around it. But I'm working on the premise that it's an index-linked counter and favoured by fund managers - local and foreign - when they buy.

Yeah, it's a double-edged sword, of course, as seen from the slide, which came about due to some of them selling. But, as seen in the past, there is a season for both. When the buying arrives again, TM is the type of counter that easily adds 10 sen or more in a trading day. This is what creates excitement among traders and many will be rushing in. CU doesn't have to strike - when I get "enough", I'll take the profits. At least that's the plans and strategy.

Posted by Mat Cendana > 2012-11-21 14:54 | Report Abuse

@Antz78, this is from a comment at the Sime-CR thread about gearing. You can replace the instances of "Sime-CR" with the warrants kcchongnz listed above:

[Cut & Paste]
Posted by passerby > Oct 30, 2012 09:34 PM | Report Abuse

gearing = underlying price / ( warrant price x exercise ratio )

it is a measurement of how many number of underlying equivalent you can purchase with a unit price of the underlying

for Sime-CR, gearing should be = 9.80 / (0.04 x 8 ) = 30.6 times theoretically. However, the effective gearing ratio could be less

high gearing = high leverage exposure. 1 tick of movement, you will see a significant % of gain or drop. It always associated with high risk

If you see the mathematical equation, high gearing happens when
:-

a) all parameters the same ( warrant price & ratio ) but underlying price went higher = means warrant trading at low premium or discount

b) all parameters the same ( underlying & ratio ) but warrant price went lower = means warrant is deeply out of money

* notes, exercise ratio is a constant, you can safely ignore it in your analysis on the mathematical equation.

You can do the rest of the analysis on your own from here :)

if this continue, sooner or later, all the fundamental kakis become punters kaki already

Posted by Antz78 > 2012-11-21 15:11 | Report Abuse

Thanks MC...
Great!..
Good to know a lot of helpful ones in I3.. :)

Posted by kcchongnz > 2012-11-21 15:16 | Report Abuse

Mat Cendana,
Excellent posting. Totally agreed with you. Although for me I will take CT first.

Posted by Mat Cendana > 2012-12-27 16:53 | Report Abuse

I'd say it wouldn't matter too much which CW it is (except CV at that ridiculous selling price) although the individual's profit would definitely differ from another based on variables like when one chooses to sell. I doubt those who buy now would still be holding it around Sept. next year. The main concern is the mother's performance, of course - if it goes down, then everyone loses.

Posted by Mat Cendana > 2012-11-21 18:27 | Report Abuse

Antz78, I'm also quite new with warrants. It's just that you are even newer:-) I'm still learning and trying to be more successful with trading it. As with ordinary shares, I've made both profits and losses over the past few months. Have learned some very valuable lessons from these and I hope to avoid repeating mistakes while trying to repeat the good trades.

You can view CWs as "a (much) cheaper alternative to buying ordinary shares". For example with TM - RM5,400 can get you 1,000 units of it. But with the same amount, you can 135,000 units of TM-CU. If TM goes up 10 sen to 5.50, you'll get a gross profit of RM100. After deducting the buying and selling costs, it will be about RM30 - just enough for a trip to MacDonald's for two.

The price movement of warrants, percentage-wise, are often magnified compared to the mother. It's a question of MOMENTUM, which I define as the level of excitement and hope induced in other traders coming as a result of seeing the mother moving. When there's excitement, most people don't stop to calculate and think about premiums, gearing and such - their only question is "Is there a good chance to make money from buying it at this price?"

If the mother gains 10 sen during the trading session, that should be enough for the CU to go to 0.045 at least. An otherwise `miserable' half a sen x 135,000 units will bring in RM6,075. After deducting the cost, you'll have a profit of RM640. Compare that to the RM30 earlier and you'll understand why some of the people here are so enthusiastic about warrants.

Of course there's the downside too. The most obvious is that if the trade doesn't work out, the reverse will happen. And it's *very* painful. So, just keep this in mind when you want to indulge in warrants. It's that old "Bigger risk, bigger reward (or "loss").

"Trade and financial management" - I feel one must get this right. This includes risk management. Our capitals may be different in amount but the basics are essentially the same. Over-extending yourself, too many contra trades etc. often gets one in trouble. With warrant trading over a period of time, it's impossible to make profits each and every time.

The key is to minimise losses whenever we make a wrong call and to maximise profits from the right trades. This is easier said than done, of course. But it's something that we will just have to continue learning to do well, and this will be a lifelong lesson. Over time, however, when one learns from his various trading experiences and through sharing with others - plus through improving our selves (spiritual, psychological) - we do get better.

Posted by Antz78 > 2012-11-21 19:28 | Report Abuse

Wow..MC. Thanks for your in-depth view of CWs.
Yes, I do agree the higher risk involved in trading these CWs. The thrill of high return may excite you but need to keep check the downside of high losses may incurred if it does not work.
I have my fair share of losses in trading these CWs as I did not understand the mechanics of it. It was real stupid of me then.
Now, I'm trying to understand more about these and hopefully can trade more wisely. I guess we need patient especially in current market condition. Thus, contra play may not be so wise.
Idea is always to buy at low but low can can lower,right. Thus, I'm always concern of this, trying to see the right safe price to enter.
As blue chips are going lower, their CWs are getting attractive but trying to contain the temptation, at the moment..
Yes, hopefully we can get better in trading these..
Good Sharing Bro.

Posted by Mat Cendana > 2012-11-21 20:07 | Report Abuse

As with ordinary shares, if we can just get the TIMING right when buying and also selling, then things will be absolutely perfect. With this in mind, and with making profits our sole objective, it doesn't really matter what counter that we're in.

As we often see in the market, a high quality, dividend-paying counter won't necessarily translate into profits when we buy. Come in at the wrong time and it doesn't matter how many billions the company had made and how glorious its future may be. The most recent examples are the telcos - TM, Axiata, Digi and Maxis to an extent. And we have also seen how obviously lousy companies can result in significant profits. It's all a question of "When", which is extremely difficult to get right since we simply don't know the future.

But we can try our best...

One way is through technical analysis (TA). It's not perfect but it does help. At the very least, we won't be flying totally blind. Not that we'll have crystal-clear vision either with TA - it's just that TA can be a very useful tool in helping make decisions. But we'll have to put in the time to learn and practice. As with any other skill, our knowledge of TA will improve when we continuously learn.

At the moment, I'm trying to use both fundamentals and TA to help choose which counter and when. Plus plain gut feeling which comes about from previous experiences, one's interpretation of the current situation and prediction of the near future. There are so many variables, some of which we don't fully know about. This isn't perfect but what is? To profit from the market, we have to buy (and then sell). That means at some point we must make decisions.

With warrants, often we'd have to jump the gun in that we come in just a bit earlier before the crowd does. If we wait until there's a clear breakout signal in the mother's price, the CWs would likely have already gone up and there's not much safety margin left for newcomers. It would be okay if the mother continues to rise. But sometimes the CWs had already factored this in (they are often ahead), and we'd be left holding the bag. But at the same time, coming in early isn't a guarantee of profits either. Sometimes the mother simply fails to take off.

The market and warrants are tough. But one encouraging truth that I know is this: despite all the problems, it's definitely possible to make money:-) That's enough reason for me to keep on doing this.

Posted by Antz78 > 2012-11-21 23:11 | Report Abuse

Yes Bro... can't agree with you more.
Like your posting..
Hope to learn more from here..

Posted by kcchongnz > 2012-11-28 12:26 | Report Abuse

hei Mat, looking at the quotations for TM, your TM cu got huge potential man!

Posted by Mat Cendana > 2012-11-27 17:28 | Report Abuse

The mother is riding on telcos rebounding. If this continues, the ex price of 6.00 is more than achievable. Especially with the long expiry date. By the way, notice how the CV market maker refuses to let go at lower prices despite it being almost the same as CU. This can be taken to mean that CU is under-priced at the moment, all things considered.

Posted by i12brich > 2012-12-03 07:19 | Report Abuse

From my years of observations, when investing CW, other than what KC and MC have shared, you also look at which bank is issuing. OSK is the worst issuer and you have higher chance of losing your money to them, always to their advantage.
Also don't be fooled by the best buy and best selling price queue you see. Sometimes it is the same person, or namely the same bank behind. Example, queue 1000 lots each from 0.13, 0.135, 0.14, 0.145, 0.15 then best selling 1000 lots each from 0.165, 0.17, 0.175, and so on and the people gueing is only 1 throughout. Trust me, someone is doing it so that if you sell low, he gets it if you buy high he sells it. It's a formula to his own advantage. You know what I mean? CIMB Call warrants are the most generous.

Posted by i12brich > 2012-12-03 07:38 | Report Abuse

I am holding TM-CT now. Exercise price @ 5.179, ratio 4.75 better than those come out after it with higher exercise price. Lower exercise price = lower risk though the return sometimes may not be a few hundred % but at least you won't lose 100% of your capital. Have to give some allowance if mothershare drops a bit in that final month.