This is my experience dealing with Call Warrant.
Let's look at the price surge of CIMB, from RM 7 to RM 7.50
What about CIMB call warrant, move also not move at all:
CIMB-CI 0.185 Due: 14-01-11 Ratio 7.50:1 Strike 6.15 Premium: 1 %
CIMB-CH 0.175 Due: 25-02-11 Ratio: 10:1 Strike 6.40 Premium 7.5%
I am stuck with TENAGA CL, Proton CB, Proton CC (This 3 very near expiry date) and BJtoto CF, hope that I will not loss money.
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7 comments
With CIMB at the morning closing price of RM7.34, CH and CI at RM0.175 and 0.185 are selling at a premium of 11% and 2.7% respectively. Ignoring transaction costs, both CH and CI will expire worthless unless CIMB can rise by 11% and 2.7% for CH and CI respectively. With historical volatility of CIMB of 35%, the price of CI is ok only but CH is way overpriced. The problem is the effective gearing of CH and CI is less than 1, which is not attractive at all for gambling. High dividend declaration for CIMB may destroy the value of call warrants too.
Sorry corrections
The warrants are both in-the-money as CIMB price is higher than the exercise price. One will only make profit if he buys the warrants now and CIMB rises by 11% and 2.7% for CH and CI respectively on their expiry date. As the warrants are both in-the-money, the delta, or change in option price to the underlying share is close to 1.0. the effective gearing for CH and CI is about 4 and 5 respectively.
I thought so.
Luckily didn't so fast feedback.
Only lack of volume.
ck5354,
would you like to take a look at Gen-C1 and C2. They seem to be selling at good discounts now. With the gearing of 4 and 8 respectively, one seems to be able to make very good profit when they expire in a month time, assuming the price of Gen SP stays at S$1.26. Other call warrants of Gen SP also seem to have very good time values although selling at slight premiums. Please comment.
Too high risk for me.
Gens C1 only left 35 days.
Gens C2 only left 28 days.
This is like big or small.
If want to bet maybe Gens C6 still have 153 days and discount of -5.42 and mother is year high.
As I say call warrant lack of liquidity.
ck5354,
At the closing price this morning, C4 and C6 seem to me to be the worst bets for Genting SP call warrants. C6 is not as good as C1, C2, C3 and C7 in terms of low premium; it is inferior to all the rest in terms of gearing and time value obtained from option pricing model.
If one looks at the price of C6, it seems to close at 0.235 on 30/7/10 while Genting SP closed at S$1.27. C6 seems to sell at a discount of 5% and with good time value too, right? Wrong! No trade was done for long time and the market maker quoted bid asked price of 32 and 32.5 sen respectively now. If one buys at 0.325, it will be sold at a premium of 4%, and it is also way overpriced based on option pricing. No wonder nobody is interested in C6; high price and extremely low liquidity. Investment bank looking for waterfish.