(Bought a few more RNG wts @ .40c. According to me the Delta is ~30%, so you figure out the leverage ! Again we see lots of warrants on offer despite the strength of the stock.)
OK, if I understand warrants and delta correctly, then if RNG doubles from 2.79, then WT with a delta of .30 would gain 2.79x.3= $.837 for a gain of 312% (.837+$.395)/$.395. The leverage would be 312%/200% or 1.5:1.
A leverage of 1.5:1 wouldn't be particularly interesting, except that delta isn't a constant. Why take on the added risk of a WT compared to a stock for only a extra possible 50% gain?
Once the warrant is in the money, however, the WT is going to move with the stock price dollar for dollar (for WT's with a 1:1 exchange ratio). If RNG becomes a 10 bagger, then the price would be 27.90 and the WT maybe 23 or 24 for a gain of 58:1, thus almost 6:1 leverage. The larger the move in the stock, the closer the leverage becomes to the ratio of the beginning stock price divided by the beginning WT price.
Do I understand all that correctly? I've made a little money in stocks, and lost it in bonds, options and futures, but I'm new to warrants. I assume the delta of a WT is determined by watching trading patterns of the stock ant WT, but what's the value of knowing it if it's changing as the WT becomes in the money?
Thus I'm looking for WT's with a wide spread between stock ant WT price, thus out of the money, for stocks that have good chance of being multi-bagger. RNG, indeed, might be a good candidate. Any others? |
