I look LGND and LGNDW are more like lower-risk/lower-reward and higher-risk/higher-reward investments. To make it easier to do the math, let's assume that I have some available fund (may including margin) to invest. The current price for LGND and LGNDW are $11.25 and $5.625, respectively, which are both marginable. The difference between these two is now $5.625. On Mar./2000, the difference should be $7.125. The following table will demonstrate the percentage gains on Mar./2000 for both cases:
LGND LGND Gain LGNDW LGNDW Gain
11.25 0% 4.125 -26.67%
12.75 13.33% 5.625 0%
14.25 26.67% 7.125 26.67%
17.25 53.33% 10.125 80.00%
25.00 122.22% 17.875 217.78%
50.00 344.44% 42.875 662.22%
If LGND can reach $14.25 on Mar./2000, LGND and LGNDW will have the same gaining ratio. If LGND get higher, LGNDW is outperform LGND. But, if LGND doesn't pass $14.25, LGNDW will gain less than LGND, or get greater loss than LGND. Furthermore, LGNDW is easier to get margin call. So, if I believe LGND will get pass $14.25 before Mar./2000, LGNDW seems to me a better bet (but with potential higher risk).
Nai |
