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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers

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To: SwampDogg who wrote (38242)	4/14/2007 11:28:08 AM
From: koan	Read Replies (3) of 78408

Swamp dog, I was speaking if you own either one share of stock: say BWR stock versus one BWR stock wt. Both would have approximately the same upside (as the wts are so deep in the money), but if the company went bankrupt one would lose approximately 1/2 with the wt that they would have lost with the stock. They only paid one half. Because BWR wts are so far in the money time deterioration is almost negligible, at this point. If one puts the same amount of money into the BWR wts they get 2 to 1 leverage, so they will make twice as much if the stock continues upoward. For the same investment dollars. RE K wts (apples and oranges), or any wts involving serious time deterioration, yes, they can be dangerous. Time value is always deteriorating unless you are so deep in the money you are only dealing with intrinsic value. And wts are especially dangerous if used by people who do not understand them. I own no K wts at this time, although if gold keeps running and the stock moves further in the money (and the leverage is good) I may change my mind. But only a seasoned wt investor should mess with them. I repeat myself: wts can be very very dangerous, so either one should make an effort to understand them or not use them at all. Wts can also be very very profitable and a powerful tool in ones investment kit if one learns how to use them. When I buy wts swampdog, I make calculated guesses. For myself I do not feel they are dangerous, or if they are I am making a conscious decision the reward is worth the risk. But I do weigh my decisions. When people buy stock they make calculated guesses as well and take risks and can lose a lot. Look at the tech bubble debacle of 2,000. or any one of the many metals bear markets over the last 100 years. Even the yearly "go away in May" phenomenon". The knowledge and judgement one possesses and uses when they invest in anything determines to a large degree how well they will do with that investment. Knowledge directed perception. All investments have risk.

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