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Discussion Starter #1
first off i would like to thank berube for the info on canadian warrants.
i have been looking into this particular area of investment and it seems vry atarctive.
it seems to me that this area of trading is for hedgers and speculative also with at certain times high volatilty , specially during intraday trading.
the question in my mind is liquidity.
most of them have vry small liquidity and therefor i do not understand the concept of even buying a warrrant at 5 cents but then due to such small liquidity and vry thin market it seems that u have to perform a diligent screenin of the warrants in the market.therefore it will be vry hard to sell such warrant.
if the banks are the main holders of these warrants as u stated berube why isn't there a higher liquidity in the warrants themselves?
the point of not exercising the warrants is clear to me but at one point someone will be holding such warrants and likely will exercise them.
so i assume that the last few days prior to exercise date the voume and trading will increase significantly?
I would apreciate if more info on to how u guys and specially u berube are dealing with warrants.much apreciated:eek:
 

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“We consider the recent development of stock-option warrants as a near fraud, an existing menace, and a potential disaster.”

--Benjamin Graham


(Page 413, "The Intelligent Investor", 2nd ed., with foreword by Zweig.)
 

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Discussion Starter #3
“We consider the recent development of stock-option warrants as a near fraud, an existing menace, and a potential disaster.”

--Benjamin Graham


(Page 413, "The Intelligent Investor", 2nd ed., with foreword by Zweig.)
sorry but i dont understand ur point
please explain
thks
 

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Well, I suppose that my point was to mention that there are some in the investing community (like Benjamin Graham, whom I quoted) who believe that warrants are quite dangerous.... From my view, warrants are not without their risks.


K.
 

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Well newbie first of all go check out www.canadianwarrants.com there they have a list of all expiration dates as well as exercise price. They do not update everyday so keep that in mind.

Liquidity is a problem with warrants and this can work either for you or against you. If you have to trade today or trade in and out this is not the way to go for you. If you don't care when you trade then this can work for you. How it works on the buying side is you set your price and wait in queue until it trades at your price. Someone will come by and dump 100,000 in the market and you get your price. It's the same when you sell. Oftentimes I will sit for a month or more with a sell order. I usually set my sell price the day I buy and just wait for it to happen.

I also look for arbitrage errors in warrants as well. Sometimes you can find a warrant trading under par. I currently own one of these. Pathfinder convertible debenture warrants. The stock was trading at 12.20 the strike price was 12.00 and I picked up a bunch at 14-15 cents.

I also buy warrant that sell at .005 and sell them for 1 cent and double my money. With these what I look for is a long time horizon so over one year from expiration. In one year I feel pretty secure that there will be a spike in the stock price or news that will bring the price up.

All this kind of trading is a bit like watching paint dry. If you lack patience you will lose money.

I started trading warrants because I did not have much capital and wanted to make more money. I had lost 2/3 of my money. Then I found out about warrants. Between August and December I made 600%.

I also never put more than $1000 into any single .005 warrant sometimes a lot less.

Still most of the warrants I trade are on pretty crappy stocks but there are a lot of warrants that are based on good solid stocks with a long time horizon.

A good example of this is Canadian Western Bank. If you believe this stock will go you you can buy 3 times the warrants as you can stock with the same capital. You don't get the dividends but you do get 3 times the capital growth for the same money invested.

For Dr V.

Have you ever bought a warrant? Do you know anything about it other than what you read in a book? Do you consider options a menace?

I really don't care what Benjamin Graham says because If I were to talk to him he would tell me you don't have enough money to put in the stock market. All I know is that since I have found out about warrants I MAKE money in the stock market and it paid for Christmas this year.
 

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Discussion Starter #6
well as stated below


__________________
Risk comes from not knowing what you're doing -
Warren Buffett

then again my question is wat is it that us liitle guys r doing
that is all

we can quote many but in the end wat matters is wat
we r doin
any input is appreciated
 

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Discussion Starter #7
Well newbie first of all go check out www.canadianwarrants.com there they have a list of all expiration dates as well as exercise price. They do not update everyday so keep that in mind.

Liquidity is a problem with warrants and this can work either for you or against you. If you have to trade today or trade in and out this is not the way to go for you. If you don't care when you trade then this can work for you. How it works on the buying side is you set your price and wait in queue until it trades at your price. Someone will come by and dump 100,000 in the market and you get your price. It's the same when you sell. Oftentimes I will sit for a month or more with a sell order. I usually set my sell price the day I buy and just wait for it to happen.

I also look for arbitrage errors in warrants as well. Sometimes you can find a warrant trading under par. I currently own one of these. Pathfinder convertible debenture warrants. The stock was trading at 12.20 the strike price was 12.00 and I picked up a bunch at 14-15 cents.

I also buy warrant that sell at .005 and sell them for 1 cent and double my money. With these what I look for is a long time horizon so over one year from expiration. In one year I feel pretty secure that there will be a spike in the stock price or news that will bring the price up.

All this kind of trading is a bit like watching paint dry. If you lack patience you will lose money.

I started trading warrants because I did not have much capital and wanted to make more money. I had lost 2/3 of my money. Then I found out about warrants. Between August and December I made 600%.

I also never put more than $1000 into any single .005 warrant sometimes a lot less.

Still most of the warrants I trade are on pretty crappy stocks but there are a lot of warrants that are based on good solid stocks with a long time horizon.

A good example of this is Canadian Western Bank. If you believe this stock will go you you can buy 3 times the warrants as you can stock with the same capital. You don't get the dividends but you do get 3 times the capital growth for the same money invested.

For Dr V.

Have you ever bought a warrant? Do you know anything about it other than what you read in a book? Do you consider options a menace?

I really don't care what Benjamin Graham says because If I were to talk to him he would tell me you don't have enough money to put in the stock market. All I know is that since I have found out about warrants I MAKE money in the stock market and it paid for Christmas this year.

thnk you for the insight B
by the way it is know that cwb is or already bought back 800000 warrants.
do u know if this took pplace?
wat do u think of orsu metals?
please pm me if u can i am really interested in gettin my money in that.
much aprreciated
 

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Discussion Starter #8
i guess i didnt read enough
the repurchase of warrants of cwb already took place in january
 

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Have you ever bought a warrant?
Nope. (And on purpose, I might add.)

Do you know anything about it other than what you read in a book?
Your question implies that there is more to be gained outside of simply reading. Warrants aren't some mysterious investment strategy that require me to sacrifice lambs and run around in the bush. They're straightforward financial instruments which have their pros and cons.

Do you consider options a menace?
"Menace" is, perhaps, too strong a word to use -- it was Graham's, not mine. But I agree with his sentiment that one has to appreciate the risks involved. A 20% drop in a stock's price can lead to a 60% drop in the value of a 3:1 geared warrant on said stock.

When betting that a company's stock price will accrue in value, from the perspective of risk vs. reward, I prefer to own the actual stock itself rather than using 'call options' or warrants. This is because, when I invest in a company that I expect will succeed, I like to be compensated for the risk via dividends and voting rights (and, I suppose, to a less important extent, shareholder rights). This works well with my philosophy of buying and holding for the long-term to minimize overhead costs. I view warrants as long-term versions of 'call options' -- and they carry the same risk in that they could be worth $0 if the stock isn't trading above the exercise price on the expiry date.

All I know is that since I have found out about warrants I MAKE money in the stock market and it paid for Christmas this year.
You'll note that I never said that an investor couldn't make money off of warrants. But again, it's important to mention that they're not a guaranteed win, as you've often implied in your posts. As with any investing strategy which employs leverage/gearing, there is the potential to make a lot of money, and also to lose a lot as well.


K.
 

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Your question implies that there is more to be gained outside of simply reading. Warrants aren't some mysterious investment strategy that require me to sacrifice lambs and run around in the bush. They're straightforward financial instruments which have their pros and cons.

There is value to reading books.... but there is nothing like doing to become informed. I have read more than my fair share about space travel but I can assure you I am still not an astronaut.

I think dividend producing stocks are lame. If I had put all my investment capital in a dividend producing stock instead of warrants in August I would have made $50 instead of the $10,000 I made trading warrants.

A 20% drop in a stock's price can lead to a 60% drop in the value of a 3:1 geared warrant on said stock.

First of all most warrants are not geared 3:1 the usual ratio is 1:1

Second it is true that the percentage drop is higher in the warrant than the share price itself however the capital lost can be much less.

For example lets use CWB for example. Friday it was trading at $21.00 and the warrant was trading at $7.86.

The strike price is 14.00 on the warrant and it's good until 2014. The dividend is 0.44 per year or about 2%

So lets' say you want to buy Canadian Western Bank stock and you buy 100 shares. This will cost you $2100 plus you will get $44.00 per year for the dividends.

What you are counting on is the appreciation of the share not the dividend. You buy it because you think it will go up.

So basically if you buy the warrant for the same exposure of 100 you will pay $786. You lose the $44 but... you get the the same appreciation as someone who paid $2100.

You can then use the rest of your capital to diversify and buy something else.

Lets say lightning strikes Canadian Western Bank and they lose all their value.... guy number one loses $2100 and the guy who bought the warrants loses $786.

But again, it's important to mention that they're not a guaranteed win, as you've often implied in your posts.

Neither is any stock....

I employ 3 separate and distinct strategies when I trade warrants.

1 - Liquidity play - Taking advantage of large volume orders in a illiquid stock in some cases acting almost as a market maker. Taking advantage of the fact that the trade differential from .005 to .01 is 100%. Taking advantage of people who make market orders in a thinly traded stock.

2 - Arbitrage errors - Warrants are so poorly understood that warrants that should be tracking the stock price are not. After the strike price the warrant should exactly follow the stock price plus a premium. Due to some exchanges not even listing the warrant for trade for a while so basically no one can buy it and anyone who is trying to sell has no buyer driving the price down. This happened over Christmas with Brompton VIP warrants and just happened with Pathfinder Convertible Debentures warrants.

The equivalent to this would be being able to buy CWB warrants at $5.00 when the stock is trading at $21.00.

3 - Buying warrants for the long term - Some warrants I have bought because I think something interesting might happen to the stock. I currently own Breakwater Resources warrants. The stock is one of the highest volume ones currently trading. I bought the warrants at .16 and so far they have doubled in value.

I do quite a bit of research before I buy. First of all I have every single warrant on my stocklist on Globeinvestor and I follow it regularly. Before I buy I check google for bad news on the company, then I check Itrade for any technical indicators (green means go) on the stock. Then I check Canadian warrants to make sure that the expiry date is far away. Then I try not to risk more than $1000 on any one warrant trade. Then I set my price as soon as the trade goes thought and go to my job and wait for it to trade.
 
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