I would like to do a follow-up on the following blog posting, The Profitable Call Warrants
1. Astro-CA.
Born 23/5/2006.
COMMERCE INTERNATIONAL MERCHANT BANKERS BERHAD ("CIMB") PROPOSED ISSUE OF UP TO 28,000,000 NON-COLLATERALISED CASH-SETTLED CALL WARRANTS ("CW") OVER ORDINARY SHARES OF ASTRO ALL ASIA NETWORKS PLC ("ASTRO") ("ASTRO CW")
28,000,000 Call Warrants was issued by CIMB at 0.225.
Call Warrants expired 29th Jan 2007.
MONTHLY DISCLOSURE PURSUANT TO PARAGRAPH 5.11(2) OF THE LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD
The following table is interesting.
Only 1,693,600 out of the 28,000,000 call warrants were exercised. What happened to the 26,306,400 call warrants? Did they died on expiry and went to the share heaven?
2. Scomi-CA
Born 23/5/06 .
COMMERCE INTERNATIONAL MERCHANT BANKERS BERHAD ("CIMB") PROPOSED ISSUE OF UP TO 35,000,000 NON-COLLATERALISED CASH-SETTLED CALL WARRANTS ("CW") OVER ORDINARY SHARES OF SCOMI GROUP BERHAD ("SCOMI") ("SCOMI CW")
35,000,000 Call Warrants was issued by CIMB at a price of 0.175.
Call Warrants expired 29th Jan 2007.
MONTHLY DISCLOSURE PURSUANT TO PARAGRAPH 5.11(2) OF THE LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD
The following table is even more interesting!
35,000,000 died on expiry and I wonder if they too went to the share heaven also?
And as mentioned in the first posting, The Profitable Call Warrants
- Assuming CIMB managed to sell all their warrants on listing day, this is pretty profitable, eh?
My dearest Moo Moo Cow, do not get me misunderstood. I am not saying that you cannot make money in such so-called instruments. (Actually, I call them 100% pure stock market gambling chips) Some traders have indeed profited from trading such instruments during the short life span of these warrants but if one buys this warrant in hope of profiting from the exercise price, then this example would show clearly how risky this venture is.
Just for the sake of you, my dearest Moo Moo Cow, I have uploaded both these two charts to see if the following point mentioned above is true.
- Some traders have indeed profited from trading such instruments during the short life span of these warrants
And as can seen from the above charts, I do not dispute that there existed the window of opportunity for the smart trader to make money from these two call warrants but as seen from the exercising of warrants, if one buys these call warrants in hope of profiting from the exercise price, then this example would show clearly how risky these venture are.
Hi,
ReplyDeleteJust to clarify, on expiry, only a few warrants were exercised. No, they did not go to Warrant Heaven.
Many investors trade warrants like shares. Most will not hold it to maturity as its value should reflect the intrinsic value which is the difference between the Underlying and Exercise Price. Hence, the only reason why you see only a few warrants being exercised is because many people have sold it back and took their profit already.
By selling it back to the market, or to the issuer, the profit made should be similar or not, identical, to the moneys they will receive upon exercising.
If you really understand the trading of warrants, you will be surprised on how to use its gearing and leverage advantages for your benefit.