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Gold/Mining/Energy : Precious and Base Metal Investing -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (11271)	5/21/2003 12:40:12 PM
From: re3	Read Replies (1) \| Respond to of 39344

oy ! -g- i just got filled on the warrants on toronto @ .51 i did my own calc. that @ 2.69 canadian for wheaton (or more) at expiration date, an equal amount of $ canadian would be better off in the warrants...under that, the stock is best... but, since i'm a nostalgic guy with a not too bad memory, i can recall a certain someone pointing out that Homestake calls were silly cheap and that certain someone was bang on correct there !

To: LLCF who wrote (11271)	5/21/2003 2:08:46 PM
From: Tommaso	Read Replies (2) \| Respond to of 39344

>> the warrants on the AMEX will rally as the Canadian dollar RALLIES not sells off. If the Loonie goes to par with the ClownBuck tomorrow ceteris paribus, the Amex Warrants [.40] will rally to equal the Toronto price [.55?]<< To start with, this has not happened. The loonie is higher than it was a year ago and the warrants are lower. There is good reason for this. The $1.65 exercise price is fixed in Canadian dollars. It is money you have to PAY, not money that you receive. You PAY $1.65 in Canadian money in order to get one share of WHT. If the two currencies were on par with one another, you would have to PAY $1.65 in US money to get the stock. Right this minute, to exercise the warrant, you would only have to pay $1.22 in US money. If, tomorrow, the dollar and loonie were equal, you would have to PAY $1.65 in US money to get the stock. By purchasing the warrant, you agree to pay a certain amount of Canadian money if you wish to convert it to stock. If the Canadian money appreciates against your own currency, you have to convert more of your own currency to make that purchase. Buying the warrant is not the same thing as buying a traveler's check in Canadian money. The travelers check is an agreement to pay you a certain number of Canadian dollars. The warrant is an agreement that you will pay a certain amount in Canadian dollars. For a US investor, there is this currency risk. To buy the warrant is partly (for a US investor) like buying a put on the Canadian dollar. To buy a travelers check is partly like buying a call. I have to admit that I have never thought of buying either options or warrants as insurance against loss. I buy them purely in hopes of making money, and I usually do make money. In fact, I have made a lot of money. But these WHT warrants are the stupidest thing I ever got into. I admit that I did not do the arithmetic carefully before buying them. You can own WHT stock, and not lose any money at all if it remains at its present value. But in that case you lose 100% of anything you put in the warrant. Gee, trying to explain this is as hard as when I tried to explain to people that certain LEAP puts on the Dow were actually selling at a negative premium--that is, they were selling at almost 10% below their true fair value at expiration because so many people were sure the market had no way to go but up. So I just went on and bought them and sure enough, I got an additional 10% on top of the market-justified increase. And I expect them to acquire the ordinary time premium on top of that. I had a friend once who was settling up some accounts with a third party. He got mixed up and thought he owed the third fellow some money. I kept saying, "No, don't you see, he owes you the money. " He kept answering, "Yes, yes, I understand." Finally I thought, "Gee he's a nice guy. He just wants to help this fellow out." So I shut up. Some days later, he finally figured it out. But it was too late. The other guy was hundreds of miles away. Anyway, for US investors, those warrants will behave inversely to the loonie, as has already happened. Only if the stock itself has a huge move upwards will they turn out to be a good idea.