Question about this warrant

[Seneca60BC]

Hi All

I do not quite understand why this warrant ANZVMI - which is a MACQUARIE 1600 ANZ CALL WARRANT 28-AUG-08 is trading for like 0.86c, when the ANZ share price is like $19.50 -

Since this warrant is in the money, should it now be more expensive than this - or am i missing something ?

Thanks for your responses.

Cheers

 

[wayneL]

Re: Question about this Warrant.

Hi All

I do not quite understand why this warrant ANZVMI - which is a MACQUARIE 1600 ANZ CALL WARRANT 28-AUG-08 is trading for like 0.86c, when the ANZ share price is like $19.50 -

Since this warrant is in the money, should it now be more expensive than this - or am i missing something ?

Thanks for your responses.

Cheers

Is that the last sale? If so, it's not the tradeable price.

Have a look at the bid and ask. What are those numbers?

 

[Seneca60BC]

Re: Question about this Warrant.

0.83 and 0.86 - is this not low? I mean I can buy here at 0.86 and then exercise this option on the market - which is buy the shares at $16.00 and sell at $19.50 - making an approx $3.00 profit per share right ?

 

[wayneL]

Re: Question about this Warrant.

0.83 and 0.86 - is this not low? I mean I can buy here at 0.86 and then exercise this option on the market - which is buy the shares at $16.00 and sell at $19.50 - making an approx $3.00 profit per share right ?

Ahhhhhh just looked it up. The difference is in the conversion ratio.

You need 5 warrants for one share. That means the real price is 0.86 * 5

= $4.30

ANZVMI
Description: MACQUARIE 1600 ANZ CALL WARRANT 28-AUG-08
Type: Call warrant
Issuer: MACQUARIE BANK LTD.
Commenced Trading: 25 Jun 2008
Expiry: 28 Aug 2008
Exercise level: 16.000 (expressed in $ or index points)
Warrants per underlying instrument: 5.0000
Exercise style: American
Warrants issued: 10,000,000

 

[dubiousinfo]

Re: Question about this Warrant.

This is a call warrant and has a conversion ratio of 5:1. Meaning you will need to buy 5 of the warrants in order to exercise the right to buy 1 ANZ share at $16.00.

Not sure what its trading at, but for the exercise lets assume you can pick it up for 86c

So 5 x 86c = $4.30 + $16.00 = $20.30

When dealing with warrants, you really need to look at all the details. ASX site has some good reading and some good threads on here.

 

[Seneca60BC]

Re: Question about this Warrant.

thanks Wayne, that clears it up

And dubious as well hehe

 

[AlexanderPop]

be very careful with warrants. i once take a trade on a 'barrier' warrant not knowing what the 'bar' in the name meant...very silly really.

 

[AlexanderPop]

obviously i lost onn the trade...everything. once that barrier is hit, the warrant is worth 0. ouch

 

[skyQuake]

Here are 3 pieces of advise that will save you thousands.

1. Dont trade vanilla warrants
2. Dont trade barrier warrants
3. Dont even look at warrants if you are inexperienced.

Compare the price of vanilla warrants to those of similar options... Even with the atrocious spread on most them, oppies are always cheaper hands down.
Caveat with barriers, they are very situational and very dangerous. Useful in a handful of situations only.
Have a look at the PDS for UBS barriers, they actually tell you that they will push stuff to barrier levels when its close due to 'hedging' concerns... If thats not a warning I dont know what is.

Cheers