Does anyone trade regular put and call warrants?

[anne]

Please do not respond to this thread if you do not regularly trade warrants!

I am having trouble with Commsec throwing a large proportion of my warrant orders into manual processing because the price I am wanting (having) to pay is a lot different from the price the warrant last traded at.

Of course this will happen as warrants are highly leveraged so their price jumps about a lot; they are often also hugely illiquid, going sometimes weeks without trading, so again the next price they trade at will be a lot different from the price they last traded at.

Having my buy order processed by Commsec slow coaches fouls up the whole system - if the underlying share's price is moving fast then of course the offerred warrant price will quickly move to be out of date so I never get my order filled, unless the price moves in the opposite direction to what I was expecting!

My question is "Is there a broker that specialisies in warrant trading that doesn't whack on the filters triggering manual processing so readily?" I have so far rejected commsec, sanford and macquarie direct. Etrade hasn't returned my call.

Etrade is supposed to do a lot of on-line warrant trades. Is it so punative with their filtering system?

Iis it possible to trade exchange-based options on-line or are you required to make phone orders for them?

Cheers Anne

 

[sails]

Re: Does anyone regularly trade regular put and call warrants?

Anne, I have traded instalment warrants on occasions and have no problem with straight through processing using WebIress through Morrisons Securities - it's instantaneous.

I believe Trader Dealer and Etrade also use WebIress, but I guess you would need to still make sure they don't intercept orders for manual processing as Commsec seem to do.

 

[eddievanhalen]

Gday Anne,
I think I detect the Anne I know there I have traded warrants in recent times via Trader Dealer without any noticeable delays and , as you know, I'm pretty red hot on being stuffed around by broker filters.

In terms of the overall package and service I have been very happy with Trader Dealer and could not think of a good reason for staying with Comsec myself having experience them first hand as an AOT/Comsec client. Trader Dealer went out of their way to make my very large CHESS transfer painless too.

Ed

 

[eddievanhalen]

BTW with Trader Dealer - yes , you can buy calls and put options and sell options over stock you own or as part of a buy-write.

Ed

 

[anne]

Thank you eddievanhalen and sails.

I have discovered the source of the problem. Traderdealer does have a filtering process but when a trade does require human eyeballing then traderdealer manages this process in 2 seconds. Commsec requires several minutes. Sanford guy said he could just about guarantee me 2 minutes on the outside.

commsec guys require longer because they have a heavy workload. (!!!!)

It is possible to buy ETOs with trader dealer on line, but they are still exposed to the same filtering process if the next trade varies enough in price from previous trade - so no real escape there.

Traderdealer guy, who was very nice, despite my best efforts to be abusive, said I could trade my head off with the particular warrrant - buying and selling almost an infinite number of times in the one day for the single commision for buy and single commission for sell.

The mind boggles.

He even assured me the account application form would be easy to complete.

Thanks again. I'm so cross- I ferreted out my jmbwma warrant -- placed my order for 39.5c, knowing there were more than enough warrants on sale at that price, only to have it go into manual processing and by the time it came out, the price had jumped to 44.5c. It is now 50c or something.

This is my umpteenth experience of this and if I hear another person utter "well, we need to maintain and fair and orderly market" I will explode!

Cheers Anne

 

[anne]

Sails, thanks for the morrisons tip.

Now, they do sound good. They allow you to set your own filter level in advance. They don't muck around with humans eye-balling orders. They either permit the trade or reject it - and you, the trader, can decide how tough the filter will be.

They are cheap too - $22 a trade for up to $50,000.

They don't offer traderdealer exotics of an infinite number of trades in a day for $33 though.

Golly - I can see me opening up thousands of accounts here! Everyone offers good things but no-one offers all the good things.

Cheers Anne

 

[Magdoran]

Hello anne,

You could say I’m a veteran warrant trader, although I don’t trade these regularly anymore since I’ve moved to other derivatives – mainly options – I hope that doesn’t meet your exclusion clause....

Ok, it sounds like you actually have more than a processing problem here, but let’s deal with that first.

I have used National Online and Sanford Securities for warrant trades – and they are both usually very responsive, essentially instantaneous once you’ve hit the buy/sell button. (I think it is STP – at least it seemed like it…).

I also have a full service broker who in a previous incarnation dealt on the institutional side of warrant issues. A very valuable ally to have on your side, especially one who knows all the tricks in the book from the issuer’s side! Also, because he knows a lot of the warrant community, there are some over the phone deals for appropriate allotments where reasonable discounts can be struck with the issuer (particularly if it fits into their wider strategy) – just something to consider.

You mentioned an interest in ETOs – I have several brokers for different purposes, but if you ever move to ETOs, and want to trade more than one leg at a time, OptionsXpress Australia is very competitive on transaction costs.

Ok, so it would be helpful to know about your approach - do you actually read the terms and conditions for each issue, and do you have a system for determining the value of the warrant to ensure you don’t pay on the current bid and offer? I’ve found some issuers can readjust the values within the terms and conditions of the warrant unfavourably for the holder, and that some issuers can play a bit more fairly with this (particularly if you are making any dividend plays).

The thing I found difficult with position trading warrants was calculating the fair value, especially since the “Greeks” don’t work quite the same as options, in that specific conditions may apply for each warrant (I hope I’m not stating the obvious here), so if you’re position trading, and not long term, ETOs may work better for you (especially in constructing strategies with more than one leg).

Also the cost of the interest payments and ancillary costs built into warrants made them effectively dearer on average compared with ETOs (but not always). The best use I found with warrants was dividend stripping strategies, but this really requires a solidly bullish market to work well.

If you’re going for instalment or endowment warrants for the long term of course that’s a different matter. But you can still use ETOs to build risk mitigation strategies in tandem with longer term warrant positions too… just something to consider.

Hope this is of interest!


Regards


Magdoran

 

[anne]

Hi Magdoran

Nope, sorry, I think it was just an execution problem I was having.

I believe I can trade warrants profitably but it requires split-second execution and that's exactly what I wasn't getting with Commsec.

The last thing I want is a system that requires a slow-coach human to vet my order in his own good time.

I don't worry about the greek stuff. I do try very hard to make sure I am buying a call not a put, and vice versa, but that's about it. I also know to watch out for warrants with an X as its fourth letter!

I don't hold my warrants long enough to worry about time decay, and I rarely place my buy and sell orders in the market so the market maker doesn't know when I plan to buy or sell.

If i get into the more complicated stuff, I will SOS you.

Thanks for your post

Cheers Anne

 

[wayneL]

I don't worry about the greek stuff.

One of the seven deadly sins of option (or warrant) trading

 

[mit]

Hi Magdoran

Nope, sorry, I think it was just an execution problem I was having.

I believe I can trade warrants profitably but it requires split-second execution and that's exactly what I wasn't getting with Commsec.

The last thing I want is a system that requires a slow-coach human to vet my order in his own good time.

I don't worry about the greek stuff. I do try very hard to make sure I am buying a call not a put, and vice versa, but that's about it. I also know to watch out for warrants with an X as its fourth letter!

I don't hold my warrants long enough to worry about time decay, and I rarely place my buy and sell orders in the market so the market maker doesn't know when I plan to buy or sell.

If i get into the more complicated stuff, I will SOS you.

Thanks for your post

Cheers Anne

Don't trade them much anymore but I have had the same problem with Commsec that I was getting rejected because my order was too far from "market price" which as you said could be days old.