Precious metal company Warrants Message Board

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Gold/Mining/Energy : Precious metal company Warrants

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To: tyc:> who wrote (583)	9/22/2006 2:52:16 PM
From: LLCF	Read Replies (1) of 681

<I wonder if we are making a mistake looking for cheap warrants. After all, there may be some reason why Mr. Market makes a warrant "expensive"> The interesting thing about options and warrants is that there are often factors at play that make them cheap... with options there are many occasions that those wanting 'less volatility' in their portfolio's sell them without regard to 'cheapness' so much as "how much can I make on this "buy-write"? There are also (in techland) times when insiders sell options to "lighten up" in situations they may not want to sell stock outright. This was happening BIG TIME during the tech run up in 99-2000, stupid cheap options were available. Of course if you didn't hedge them you got smoked... still owners of many of thsoe stocks wish they would have noticed and bought the options and blew out their long stocks. Warrants??? Well, that's a freebee small companies are often forced to give buyers of stock in funding situations. If listed, the buyers of the funding can sell the options later to take profits and keep 'some' stock. There are NATURAL SELLERs in all these cases which tend to make the options/warrants too cheap vs the stock. If there are 'take over' rumors, or other information floating around that might be very bullish the warrants/options of course can get very overvalued as well... but rarely do you see any cases of "these options/warrants are cheap because the market knows this stock won't move much"... just very unusual except in the cases where there is a cash takeover bid, in which case all warrants are worth parity on the date the deal closes regardless of the amount of time supposedly left on them. An example here would be where you have a 1 year warrant and a 5 year warrant both with strike prices of say $5... a $8 takeover bid is announced and quickly closes. Both warrants are worth $3 and must be exercised or sold in time to tender the stock.... even though you may well have bought the 1-year for .50 and paid $2 for the 5-year!! DAK

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