Thinking of trading warrants

[Seneca60BC]

Hi All

I am considering trading warrants - and I would like some feedback of what you guys think and what I should be aware off- I know how warrants work, but what are your thoughts on it - I know it is driven by the issuers, i.e mac bank, so is there any problems with this ?

Is it a fair environment ?

Cheers

 

[wayneL]

Re: Thinking of Trading Warrants -

Hi All

I am considering trading warrants - and I would like some feedback of what you guys think and what I should be aware off- I know how warrants work, but what are your thoughts on it - I know it is driven by the issuers, i.e mac bank, so is there any problems with this ?

Is it a fair environment ?

Cheers

Depending on the class of warrant and how you intend to use them, I don't think it is.

* You cannot write warrants.

* If you compare warrants to the nearest equivalent option they often trade at higher volatilities. Fine if you are able to write them as well, but you can't and that works against you.

* The third obvious point is in the conversion ratio discussed the other day. The conversion ratio increases your contest costs. i.e. the money you lose in the bid/ask spread.

However, you may find instances where the above doesn't apply, except not being able to write.

In other words, watch your contest risk and increased theta. This is where they get you.

 

[Seneca60BC]

Hi Wayne

Yes i was considering trading warrants - but reading an earlier post of yours has some how dampened by interest - dont get me wrong and no offence intended - but i think i am not mentally there yet - if you know what I mean - I read a piece where you wrote about all these esoteric terms I never heard off , so I think i need to see how the market plays out for the next 2 or 3 months.

Thanks again Wayne.

Cheers