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

To: marcos who wrote (38305)	4/15/2007 6:30:14 PM
From: Metacomet	Respond to of 78409

- we get shafted in a cheap takeout" Ya had to go there... First warrants I bought, following Koan's logic, were the RNG's. After doubling in a couple of weeks, I sold most of them, after Lundin, and went looking for another undervalued metal play with attractive warrants. EPM met my criteria.

To: marcos who wrote (38305)	4/15/2007 9:34:18 PM
From: TrueScouse	Respond to of 78409

marcos, DAK and others... Thanks for a great discussion over the weekend on valuation of warrants. Very enjoyable! Me? I'm pretty firmly in LLCF's camp and I use standard valuation models whenever I'm trading options, whether on futures, stocks, ETFs, etc. I have an IB account and they have some great tools there. You just click on the "Options Analyzer" or whatever it's called and it gives you a graph of the change in valuation of the option as the underlying price changes, for both calls and puts. Unfortunately I can't use the IB A/C for Toronto-listed warrants. And the other key thing I picked up from the discussion and agree strongly with is that unless you have a view of both the future performance of the stock AND the timeframe, you shouldn't trade options/warrants. This is especially true when trading PM company warrants due to a whole range of factors -- stage of development, liquidity (or lack thereof), danger of takeover, etc., etc. Once you like a stock because you expect (hope for) a certain move in a certain timeframe, then you may find the warrant more attractive than the stock because it provides greater leverage to the move in the metals. And this is where comparison amongst the warrants available becomes important. Some of them (such as the "5 for 1" Silver Wheaton warrants) can be very deceptive. Like Koan, I like warrants for the increased leverage they give you, but the potential reward comes with increased risk and greater volatility. If the warrants are well in-the-money, the risk is less, but so is the leverage. e.g., I've held PAA.WT for years, and they've done very well -- because PAA has done very well and they're now a long way in-the-money. But they now provide less than 2 to 1 leverage to the stock price. BUT at this price they're also fully marginable -- my broker lends me 70% of the value. So the leverage is more like 6 times to cash! If the POS keeps rising and they keep increasing production, it's a great bet to me over the next year or so. The Agnico Eagle warrants are similar. My "underlying view" of AGE is that it's a growth gold stock in a major PM bull market, and it's properties have fantastic zinc credits. And it's warrants are well in-the-money and offer great leverage -- although they expire late this year. At the other end of the scale are the non-producers -- such as EPM. I hold the A warrants and they are (finally) in-the-money, and I really like this play -- but it's quite high risk in that anything could happen to their (only) project. If Russia sends its troops into Khazakstan (highly unlikely but possible), EPM would lose most of its value and EPM.WT.A would go to zero. On the other hand, if (as I hope/expect) EPM remains on track and starts producing gold at negative cost per ounce in late-2007, the project will be a cash cow and the warrants will provide far higher percentage returns from here than the stock. I'm rambling on <g>, but I really just wanted to say thank you for a good exchange. Best regards, Howy