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Strategies & Market Trends : The Final Frontier - Online Remote Trading
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To: LPS5 who wrote (11106)1/8/2004 6:06:40 PM
From: Dan Duchardt  Read Replies (1) of 12617
 
Thinking about it a bit more, now: why would I choose an "expirationless option" over a warrant, assuming both are available with respect to some reference security?

For some options strategies, an "expirationless option" would be ideal, provided it could be used in conjunction with expiring options for spreads. There are those who buy long LEAPS options (usually ITM with relatively little time value) and sell near term options to create diagonal or calendar spreads. The advantage is the lower cost outlay of the long option compared to underlying stock in a traditional covered call position, and that translates into limited risk compared to an outright stock position as well as added leverage on the long side. There is the annoying little problem that LEAPS move toward expiration and have to be rolled forward periodically. Expirationless options could be a nice alternative to rolling the long side forward and incurring the transaction costs, depending of course on how much additional premium you have to pay up front to get them.

I'm not sure, but I don't think you can write short calls against warrants the way you can against long calls. In any case, as far as I can tell warrants are pretty much the same as long term options, except for their availability as part of initial offerings. They expire eventually, so you either have to sell them or exercise them or swallow the loss if they expire.
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