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Gold/Mining/Energy : Precious metal company Warrants -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (310)	1/7/2006 2:50:22 PM
From: tyc:>	Respond to of 681

To me this is all extremely interesting. You say that you buy warrants with a long term view, but I am arguing in the short term.... How will the warrant price react in the next few weeks or as long as the current uptrend of the stock lasts ? THAT's the question that DELTA answers. For "Momo" trading, buy-and-hold warrants: I read once that a warrant price curve provides the equivalent of a MOMO trader's strategy. If the stock price moves up, the Momo trader will buy more stock. A warrant provides the equivalent by the increase in the delta. If a stock price declines, the momo trader will sell stock. A warrant provides the same by a fall in delta. (all in the short term) For "Buy and hold" strategy, trade warrants; If one is not interested in momo strategies, you can switch to a "buy and hold" by trading warrants!. For example, when I first bought my 25M warrants the calculated delta was 15% so the total delta was equivalent to holding 3750 shares of common stock. Now the delta is 17%, so my 25M wts = 4250 shares. I could adopt a "buy and hold" strategy by selling 500 shares, thus maintaing the same number of share equivalence as I started with. As the stock continues to climb I could maintain that equivalence by selling. Conversely, as the stock price declines, and with it the delta, it can be maintained by buying. Thus you would be profiting from selling high and buying low. It's all subjective !

To: LLCF who wrote (310)	1/7/2006 6:36:16 PM
From: tyc:>	Read Replies (2) \| Respond to of 681

I understand what you are saying about IV changing; warrants becoming cheaper and then more expensive. Currently, I try to ignore these fluctuations in value....to stick with the model. The one mistake with aemlw, was to sell some warrants because the IV took a jump (i.e. the warrants suddenly became "high-priced"). I sold some only to find that the increase preceded a jump in the stock price... I was left behind . At the present time, my aemlw's are "overpriced", but I continue to monitor the delta by the model, and to control delta exposure by selling common stock. I wonder whether I shall have the nerve to sell short if the stock continues to climb when I run out of stock ! (Always with the intention to maintaining delta by buying back at lower prices. And always in the belief that there's plenty to do with proceeds of sale without becoming too exposed to the one issue). This all boils down to my way-out belief that it is "leverage" that is important rather than Black-Scholes calculated prices. It's fun anyway !