Gold and Silver Juniors, Mid-tiers and Producers Message Board

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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers

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To: koan who wrote (16237)	7/14/2006 7:51:51 PM
From: SwampDogg	Read Replies (1) of 78417

Upside reward and downside risk are different sides of the same coin. To ignore one is a mistake. When looking at any situation one most compare the possible reward to the risk and give it some kind of a ratio. At this time most traded wts offer very negative risk reward using an option model. I can go out and buy a NEM 100 call expiring next month and have great leverage but I would be flushing my cash down the toilet. Run your warrant through an option model. Using 30% volatility the wts should have a vlaue of about $0.40. The fact that they are trading over 100% above that may have something to do with the fact that K has one of the highest short positions on the TSX. The wts were a good spec. off the low last May after the market thought that they no longer had any chance of being in the money. Now it is a different situation and there are much better alternatives. The junior market is very cheap if you think gold is going over $1000.

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