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Technology Stocks : Softbank Group Corp -- Ignore unavailable to you. Want to Upgrade?

To: Becky B who wrote (4244)	3/6/2000 6:19:00 PM
From: TobagoJack	Read Replies (2) \| Respond to of 6018

Becky, you insanely brave soul! Speaking of warrants while the deck chairs are being put away on that famous ship. Basics of warrants ? they give you control of underlying shares without you having to put up all the money, but they are far more volatile than the underlying shares. Stock catch a cold, warrant needs a lung surgery. Stock needs a surgery, warrant is dead. 1. We can buy Softbank now at Yen 117k (what an ugly number from our perspective now, as opposed to six months ago, a ravishing beautiful number). We buy it, and if it goes to 250k by year end (expectations trimmed back, just for the sake of this example), we make 114%; 2. Or, we can buy Goldman Sachs May 2001 with an strike price of Yen 85k for Euro 7.34/warrant. We need to buy 100 warrants to control one Softbank share (ratio 100:1). 3. So, to control 100 shares of 9984, we buy 10,000 warrants, totaling Euro 73,400, or about Yen 79,272 per Softbank share. 4. In May 2001, we need to pay (in theory, as these warrants are all settled in cash, not shares) Yen 85,000/share additional money to buy a Softbank share, together with turning in our 10,000 warrants bought at Yen 73,400, the Softbank share will cost us 73.4+85k = Yen 158,400/share. So, by May, the share needs to be above 158k. Thus there is right now a 35% premium (158.4/117) to purchasing the warrant. If the stock goes to 250k at expiration, the warrant will be at 165k, 126% gain (the gains are more magnified at gains of less than 100% for the share). If the stock goes to 85k, we lost everything. If you remember, I had bought the warrants as I took half the money out from shares sold. Maintained position of # of shares held and took money home. I turned around and bought more shares recently. 5. I do not buy warrants at premium greater than 12%, and this only happens when the warrant is already deeply in the money (strike price 56k, 40k, etc). As the share is falling, there does not seem to be a hurry.