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Strategies & Market Trends : The Rational Analyst -- Ignore unavailable to you. Want to Upgrade?

To: HeyRainier who wrote (1259)	6/29/1998 9:38:00 PM
From: majormember	Respond to of 1720

[SNRS] Rainier, Congrat's on the apparent accuracy of the SNRS price weakness. I think the longer we go without the expected listing, people may bail out. I've got the trucks lined up now. I'm ready to turn the engines on and prepare for back up. I'd love to see the 5's again to really load up. Do you see that as a possible? Regards, Skane

To: HeyRainier who wrote (1259)	6/30/1998 11:17:00 PM
From: Smooth Drive	Respond to of 1720

(WARRANTS AGAIN) >>[ Warrants ] Eric, Thank you for the information on the warrrants; I believe a concern though was the price deterioration the warrant price as it neared its expiration date. Do warrants have this time value imbedded into their price structure as well? It would make sense to, but then again, I'm not the expert. Regards, Rainier<< Well Rainier, I asked Ken Hodge (a real honest "Expert") to review my seven comments, expand where necessary, and comment on price movement. His response as follows: 1. They are a long-term option to buy a stock at a certain fixed cost. 2. Usually attached to the sale of a new issue stock or bond. (A sweetener sweetner if you will.) 3. A typical attachment might have a new issue going at 50 and the warrant at 65, with the warrant expiring in,ÿ say 5 years. Warrants almost always issued at substantial premium to stocks current price. >>From Ken: More typical would be the new issue at 5.00 and the warrants at 8.00 (you're usually looking at small or micro-cap companies when you look at warrants).<< 4. Warrants usually have a wait period (perhaps one year) before they can be exercised. 5. Most warrants have a certain life, but some are issued perpetual. >>From Ken: In the current U.S. market, there are really no truly perpetual warrants(there have been in the recent past, though).<< 6. They trade separate from the stock on the same exchange as the stock. >> From Ken: Not necessarily on the same exchange.ÿ Also, if they're embedded in the form of "units", they might actually trade along with the common stock, not separately.<< 7. Like a call option out the money, you wouldn't exercise an expiring 65 warrant if the stock was selling for 60. Regarding price action as compared to a typical option, he said the following: Yes, they do deteriorate in that way.ÿ And yes, they do have an intrinsic value if they trade "in-the-money". Unlike options, however, the issuing company usually reserves the right to extend the expiration date, lower the exercise price, raise the conversion ratio, or make any number of other changes to the warrant terms, so any serious attempt to calculate a warrant's fair value should consider these factors. Thank you... Ken Hodge stockwarrants.com