SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Politics : Gold and Silver Stocks and Related Commentary
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: koan who wrote (6761)2/17/2005 6:55:36 PM
From: koan  Read Replies (3) of 18308
 
Someone on Stockhouse asked why the wts were better than the stock on the upside, and safer than the stock on the downside, so as I already had to do it here it is.

Ok here we go-lol. Now remember we are only comparing 1 share of stock to one wt! A $.70 purchase price compared to a $.27 purchase price.

Wts contain intrinsic value, time value and leverage value. All three are fully in play with regard to the relative price of the BWR stock (.70) to the wts (.27), strike price ($1) and time left (4 years).

Einsteins theory of relativity-lol.

So lets take a what if proposition: Lets say first of all the stock drops in half to .35. Well, one can see the most the wt can drop is .27. And if the stock turned out to be another Enron then it would drop to zero and you would lose .70. but once again the wt can only drop .27.

But lets say the stock only drops .20 to .55. So the stock would have dropped .20, but because the wts have 4 years left, they retain both time value and leverage value and would probably not drop below .17 (the lowest they have ever been) which is only a dime. So on the upside you are getting 3 to 1 leverage and on the downside you would lose only half, or less if it dropped further.

Capeesh-lol?


NewsBlast Sign-Up
StockHouse NewsBlast: Receive company sponsored news and information via email.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News