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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers
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To: marcos who wrote (44000)7/5/2007 5:44:37 PM
From: koan  Read Replies (1) of 78420
 
EPM A's and B's: I remembered how to explain it.

When a stock moves through the money i.e. through the strike price, the time value metaporphases into intrinsic value. This is the key concept. The reason is because the leverage value is decreased.

As an example look at BWR wts. Even though they do not expire until Jan of 09, there is NO time value (although there should be a little)--it is all intrinsic value. No time value at all. Of course this actually should not happen as there is some leverage value left, so on that bases the wts are undervalued.

So there is a .35 difference of intrinsic value between A's and B's. If they follow BWR, which I would expect, eventually there should be a .25 to .35 difference between the A wts and B's wts as time value (based on leverage) is replaced by intrinsic value.

I was reading Quantum Zoo when the explanation came to me-lol.

I am trying to understand the difference between inertial and gravitational mass, and I cannot get it-lol.
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