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Microcap & Penny Stocks : Tokyo Joe's Cafe / Anything goes
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To: DR. DODE who wrote (5853)4/10/1998 11:45:00 AM
From: dan oreilly  Read Replies (2) of 34592
 
Doc: Warrants are "normally" played because of the leverage they afford.
rather than pay $7 for the common an investor can buy the warrant for $1 which gives him the "right" to buy 1 share of common for $6.50. As an example IF IFLY common goes to $8 the warrant is "in the money" $1.50 excluding any "time value". Based on these numbers the warrants would have increased 50% versus the common increasing 15%. IF the bottom were to fall out of IFLY the downside risk is $7..the downside on the warrants is $1 also worth considering is the fact that the warrants don't expire for a couple years so IF IFLY should falter the warrants would also be a way to stay invested in the stock with minimal downside risk.
The DOWNSIDE to any warrant is that it could expire worthless and as mentioned earlier and confirmed by another SI member the warrants are NOT "blue skied" in ALL STATES. IF the warrants do get called and your state is NOT blue skied you are at the mercy of the market as to what you can sell for and the market will NOT give you the TRUE value of the warrants. If you are considering the warrants i would suggest you either talk to your broker for a FULL understanding of the mechanics or do some reading on the subject.
If you are just playing it as a flip, then it is no different than trading any other "stock".
Hope this helps, Dan
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