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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers
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To: tyc:> who wrote (19290)8/27/2006 8:07:17 PM
From: koan  Read Replies (2) of 78414
 
Tyke, when a $3 dollar wt is linked to a $15 stock that is a 5 to 1 leverage. Put simply.

Now there is also an original leverage (which never changes) and a relative leverage which does change as the wts move further into the money.

Where everyone is getting confused is how that leverage is maifested. That is a different equation.

For instance, lets use K wts as an example because they just moved into the money. The wts will move penny for penny with the stock, but get discounted as they move further into the money by the original cost of the wts.

A metamorphases takes place whereby potential value is changed into intrinsic value-lol. Sort of like fusion.

A wts behavior changes as it moves THROUGH the money as well. First the wts slow down as they move through the money and the change from time and leverage value is being replaced by intrinsic value and then as the wts move further into the money the wts speed up again-lol.

And if K goes to $1,000 a share you will get almost exactly the same amount of money with the 3,000 wts as you would with 1,000 shares of stock, i.e. so a $3,000 investment makes you almost as much money as a $15,000 investment ergo 5 to 1 leverage!

I think I just confused everyone even more-lol.

I like the virtual leverage analogy better-lol.
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