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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers -- Ignore unavailable to you. Want to Upgrade?

To: TheBusDriver who wrote (34060)	2/26/2007 9:27:38 AM
From: koan	Read Replies (2) \| Respond to of 78431

Hi wayne, I am assuming you mean EPM wts? They have 3 kinds: 2 to 1 leverage explained for A wts at bottom of post. Sym-X Bid - Ask Last Chg % Vol $Vol #tr Open-Hi-Lo Year Hi-Lo last trade News Delay EPM.WT.A - T 5.0 0.47 · 0.48 17.5 0.47 0.65 0.305 Feb 23 15:58:02 Jan 15 realtime EPM.WT.B - T 3.5 0.355 · 0.41 25.0 0.39 0.60 0.24 Feb 23 15:13:05 Jan 15 realtime EPM.WT - T 3.0 0.43 · 0.465 2.5 0.43 0.64 0.25 Feb 23 11:43:40 Jan 15 realtime EPM - T 27.0 1.10 · 1.10 18.3 1.07 1.39 0.63 Feb 23 15:59:48 Jan 15 realtime EPM is presently $1.07 and has 3 kinds of wts: reg with a strike of $1.55 and an expiration of 12/08--no one wants those and they barley trade. The B wts have a strike of $1.55 and are good until 3/2011 (4 years to go) and A wts with a strike of $1.20 and expiration of 4/11/2010---these are by far the most popular, but a case could be made b's are better. For leverage simply divide the wt into the stock. So $1.07 divided by .47 = 2,2 leverage. Now this wt still has 3 full years to go and is only .13 out of the money which is why they are the most popular. So say you buy 1,000 shares for $1,070, for that same $1,070 you could buy 2,276 A wts. Now lets say EPM goes to $10. With the stock, you would make $10.00 minus $1.07 for a profit of $8,930. But with the A wts you bought the right to buy 2,276 shares of stock for $1.20 (one never buys the stock arbitragers settle up on expiration or a few pennies), so you would multiply 2,276 times $10 would get $22,760 then subtract the strike price of $1.20 times 2,276 (number of wts/shares you control) which is $2,731. So the stock at $10 would give you a profit of $8,930- $10,000 minus the $1,070 you paid for them. The A wts at $10 would give you $22,760 minus the strike of ($1.20 X 2,276 = $2,731 (the price you theoretically paid for the stock) for a profit of $20,029. So in conclusion $1,000 shares of stock you bought at $1.07 gave you a profit of $8,930 and the 2,276 wts you got for the same $1,070 gives you a profit of $20,029. Divide $20,029 wt profit by $8,930 stock profit = $11,098 MORE you got by buying 1,000 shares at $1.070 versus 2,278 wts you bought for the same $1,070. So last divide the wt profit of $20,029 by the stock profit of $8,930 and you get 2.242 times (leverage)as much from the wts as the stock. Last, these 2 to 1 leverages you got by dividing .47 into $1.07 is a different 2 to 1 leverage (these are different leverages!) also, the wts get more still if the are exercised before the strike as a time and leverage premium is still there. The 2 to 1 leverage is different as one is dividing .47 into $1.07 and the other leverage is subtracting final sales price from strike price. It is the middle of the night and I am tired, but I think the above is corrrect.