Options 201: Beyond Obi-Wan-Kenobe Message Board

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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe

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To: Dan Duchardt who wrote (790)	3/2/2003 12:53:44 PM
From: tyc:>	Read Replies (2) of 1064

Re long term warrants on gold stocks. The more I look at this subject, the more intriguing it becomes. Here is a quotation from the recent earnings report of one of the stocks I mentioned, concerning "stock based compensation", in other words management "stock options"; "The fair value of share options was estimated using the Black-Scholes option-pricing model with the following assumptions: Year ended December 31, 2002 ------------------------------------------------------------------------ Risk-free interest rate 4.5% Annual dividends - Expected stock price volatility 95% ------------------------------------------------------------------------ It is the 95% volatility figure that raised my eyebrows ! How much is a five year warrant worth if options on the stock have an implied volatility of 95%? I sold some common stock on Friday replacing it with warrants that afforded the equal amount of Delta. I pocketed some $600 in the deal, to be invested elsewhere. (This posting is made in compliance with the letter and intent of the following thread rule; 1) No hyping stocks. Using specific examples to illustrate a concept is welcome, ....)

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