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Biotech / Medical : VD's Model Portfolio & Discussion Thread -- Ignore unavailable to you. Want to Upgrade?

To: Vector1 who wrote (4678)	4/20/1998 11:24:00 AM
From: Flagrante Delictu	Respond to of 9719

Vector1, The beauty of the warrants, when bought for $6.125 less than you would have paid for the stock is that you get exactly the same , if not more, actual dollar return on the warrants ( you have to figure YOUR margin costs to derive the exact number), but I believe you save slightly more than $1.00 in margin costs on what you would have had to pay to borrow the $6.125 you have freed up,in your margin account, from now until 6/3/00. If the stock collapses, ownership of the wts. rather than the stock can save you as much as $6.125 per share over ownership of the stock. So, which is the wiser decision? Any time you can get a similar or larger gain & save as much as 40% of the downside maximum loss on the stock, the decision would seem to be an easy one. The concept that the warrants are riskier than the stock , is a function of the differential between the 2 when the purchase decision is made & the time to expiration, as well was what YOU would have to pay in margin costs to free up until expiration $6.125 for whatever usage you choose . Right now, if you can get the warrants for $6.125 less than the stock, you win no matter what happens if you understand that you will lose $1.00 on the warrants at expiration, but save $1.00 of what would have been the cost of borrowing the $6.125 per share less that you are paying for the warrants, rather than the stock,on margin. This doesn't mean you have to buy the wts. on margin. It means you can have the same bang for the buck (IYWPTE) by owning the wts. as by owning the stock, and release $6.125 ,that would have been tied up in the stock, to use as you wish from now until 6/3/00. IYWPTE means "If you will pardon the expression".