Posted by kcchongnz > 2013-03-31 19:31 | Report Abuse

I bought this Tenaga CW a week ago at 2 sen when Tenaga share was trading at 7.11. At those prices, CW was trading at a discount of just 0.1%. What is so interesting about this punt? The following are the statistics about CW when Tenaga at 7.11.

Price Ex-Price Ex-Ratio Expiry date Premium
0.020 7.000 5.000 29/03/2013 -0.1%

The gearing was at a massive 71 times. The table below shows the payoff of CW at various prices of Tenaga:

Tenaga 7.05 7.10 7.11 7.12 7.14 7.16
Gain -0.8% -0.1% 0.0% 0.1% 0.4% 0.7%
CW gain -50% 0% 10% 20% 40% 60%

If the 5-day AVWP of Tenaga just go up 3 sen to 7.14 for a gain of just 0.4%, the gain in CW would be 400%, for 10 times more! But if Tenaga drops by 6 sen, or 0.8%, CW loses 50%. That is the risk. So if the IB manipulates the price of Tenaga, punters would lose big money.

However shortly after the halt of trading of CW, Tenaga share price actually went up to a high intra-day to close to 7.20+. The AVWP of Tenage finally was 7.1314, and at the purchase price of 2 sen, made 31.4%. Not bad for about two weeks time to get the cheque.

So it may not be that easy to manipulate call warrants after all.

Posted by suresh_babu > 2013-03-31 22:03 | Report Abuse

what are your current recommendations? how to know which warrants to pick ? what are the selection criteria you use?

sorry, too many questions coz i'm a newbie, hope you don't mind answering my questions.

Posted by kcchongnz > 2013-04-01 04:10 | Report Abuse

suresh, since you are a newbie, i don't recommend you to punt call warrants; not before you know enough about call warrants. Even if you know about call warrants very well, the chance of winning is not that great too. The playing field in Bursa is uneven.

There are many resources, both in Bursa and the internet about call warrants. It is basically a derivative. If you are interested to know what my selection criteria are, you can search in this website too. But that is purely for education purpose.

Posted by pathew > 2013-04-01 08:45 | Report Abuse

hey kcchongnz, seldom hear you make CW calls nowadays too :)
but yeah, to me CW is really meant for advance traders who know their fundamentals and market sentiments well.

Posted by kcchongnz > 2013-04-01 09:37 | Report Abuse

Hey pathew, never heard from you a long time already. Hope you are well. I thought I have never made call in call warrant, but merely share my view on some of them by detailing the pros and cons. Hope I am right because seriously I don't encourage people to punt on call warrants, although I find them exciting.

Posted by suresh_babu > 2013-04-01 09:49 | Report Abuse

macha, like that then forever thambi cannot play warrants

if play, need to be advance traders. don't play warrants how to gain experience.

like that manyak susah lo macha. aiyoyo.....headache headache

Posted by suresh_babu > 2013-04-01 09:54 | Report Abuse

macha kcchongnz, can tell more how the warrants being manipulated ?

what do you mean by stating Bursa playing field uneven ?

Posted by kcchongnz > 2013-04-01 10:14 | Report Abuse

suresh,just type "call warrant manipulated" in this website, you will find what other say.

Posted by suresh_babu > 2013-04-01 10:23 | Report Abuse

macha: thank you, so many threads on manipulations


how about the uneven playing field ?

Posted by kcchongnz > 2013-04-01 10:25 | Report Abuse

because of manipulation so the playing field is uneven loh.

Posted by pathew > 2013-04-01 10:33 | Report Abuse

bro NZ, I'm good! I've been around just that I've not been actively commenting like last time...

Your 'calls' are always appreciated for educational purposes; Especially on WCT WB :)

But with the current volatile market situation, are there still CWs worth punting?

Posted by kcchongnz > 2013-04-01 10:39 | Report Abuse

pathew, I don't know lah because I myself didn't pay much attention to call warrants recently, except that Tenaga CW last week. You know if the market drops big because of this election, call warrants will go to Holland. I am not saying the market will drop but just a bit cautious. After all preservation of capital is more important than making money. Agree? May be I will look at them soon. Let me know if you find one.

Posted by suresh_babu > 2013-04-01 10:42 | Report Abuse

macha kcchongnz: i read from internet, most advance trader will stick themselves to certain market maker only. do you do that as well?

Posted by kcchongnz > 2013-04-01 10:46 | Report Abuse

suresh, i normally punt according to pure metrics, for example premium, gearing, implied volatility. Those who are savvy in the market have other considerations such as market maker, liquidity etc. I am learning from them and find those things are as important if not more important than pure metrics I mentioned. If the market maker don't provide the liquidity and fair pricing, how to trade? and they are many of those like that.

Posted by pathew > 2013-04-01 11:10 | Report Abuse

bro NZ, yes sir, keep us posted on your unpolished gems!
surely, will uncover some after GE is over and the dust settles :)

WCT WB still in the money, your take on this?

Posted by suresh_babu > 2013-04-01 12:19 | Report Abuse

don't play cannot gain experience, wanna play must be experienced. don't trade how to gain experience ? if wanna trade again must be experience again...

really so troublesome.....

any experience traders to share their experience on the market makers?

Posted by suresh_babu > 2013-04-01 12:33 | Report Abuse

macha kcchongnz, suresh noticed this user passerby giving some picks 2 weeks ago :-

1)Pos-CL
2)Airport-CF
3)Petdag-CG
4)UMW - CN

now this passerby is MIA already.passerby's picks ok or ko in your opinion ? which one is the best, suresh wanna try out, tq

Posted by kcchongnz > 2013-04-01 13:12 | Report Abuse

pathew, WCT Wb at 44 sen while the mother share at 2.38 is still trading a t a discount of 3.8%. with the gearing of 5.4 times, there is a potential gain of 20%. However, Wb is expiring in three weeks time. You have to have a lot of money (1.85 per share) to convert the warrant to the mother share. I used to buy Wb at 100,000 shares. So I need 185,000 to convert. What if the discount persists, and WCT share price drop? There is this execution risk also as it takes some time before the converted share come bask. In summary, the risk is higher now. But it doesn't mean the opportunity to make money for punting WCT Wb is not there. I don't know. It all depend on what is your take on WCT share price?

Posted by lotsofmoney > 2013-04-01 13:17 | Report Abuse

I went into call warrant when it was first introduced and make a lot of money. Then the bank/investment house got wiser and release the warrants into the market and let the punters pit against each others. The chances of winning became 50:50. Now they even up the price before the release.

As far as I can see, all these are high risk con games.

Yes, you can make 1000% profit if you buy at 0.005 and sells at 0.500.

Pls remeber all the CW had a short life span and you are forced to sell or pick up the shares.

The movement of even 0.005 can means loss or profit.

The only one laughing is the reminser and the issueing house.

The loser are the speculators.

Please do not try.

Just ignore them and they will die a natural death.

Posted by kcchongnz > 2013-04-01 13:43 | Report Abuse

suresh, I just comment on POS CL and Airport CF which I have data and spreadsheets. You know I don't simply comment something which I don't have the data. It takes time to search and compile the data and then evaluate. As I am also a bit fearful of what would happen come the GE. so I don't spend much time looking at them now.

POS_CL, at 21.5 sen while the mother share at 4.20, is trading at a reasonable premium of just 4.6%. This premium is low as CL has one more year before expiry. The gearing of 6.5 times is high enough and good for punting. The implied volatility of 27% is in my opinion above its historical one and hence a little pricey.

Airport CF at 9 sen while the mother share at 5.85 is trading at 2.8% premium. It has only two more months before expiry, not good. Its gearing is high at 13 times, usually good for punting. Implied volatility at 25%, ok lah.

So my opinion is POS CL may be a good punt because of its long expiry and reasonable premium. Airport. not so me. Too short life now and yet the premium is not attractive at all. The gearing could be the sharp edge of the knife.

Whatever it is, it is your take of the underlying share. Is it going up in the future and is it coming down?

Posted by suresh_babu > 2013-04-01 13:53 | Report Abuse

macha lotsofmoney, so you didn't play anymore warrants currently ? base on your previous records, you made any money playing warrants in the end ?

Posted by suresh_babu > 2013-04-01 14:01 | Report Abuse

macha kcchongnz, thank you for the comments. this implied volatility parameter - what is the significant / meaning of the figure in laymen term ?

Posted by lotsofmoney > 2013-04-01 14:06 | Report Abuse

I make 6M from warrant initially. then the banks changed tac and I end up losing 2M.

warrant is a high risk gamble. Even with 30 yrs of experience and a mainframe IBM computer + artificial intelligent progarming, I cannot beat the system.

I now refuse to even look at any one of them.

Better to donate my money to charities.

Posted by kcchongnz > 2013-04-01 14:28 | Report Abuse

suresh, just type volatility, implied volatility or whatever terms Google, you will find a lot of information. There are many other things about you ca find out about from the web. If you read and still don't understand, then ask me.

Good advice from lotsofmoney.

Posted by iafx > 2013-04-01 15:36 | Report Abuse

type "stock scam using forum" in Google, u can find lots of good lesson learnt, juz to captured 1 here:

"The crooks then start an aggressive campaign of pumping up the stock with stories about what a great business it is and how it is about to make a big announcement. They predict the stock will make huge gains in the next few years..."

no invest of securities should be done without a plan and getting the right tools from VALID securities house (e.g. kenanga, equities tracker etc etc)

good luck! :D

Posted by kcchongnz > 2013-04-01 15:47 | Report Abuse

suresh, got it?

Go to kenanga, equities tracker. Type! Then you will get all your answers to your question whether you will make money in your following call warrants:

1)Pos-CL
2)Airport-CF
3)Petdag-CG
4)UMW - CN

Posted by suresh_babu > 2013-04-01 15:54 | Report Abuse

macha kcchongnz, i type at google, found a lot of explanation on implied volatility, after some time of reading getting tired, hahahaha. maybe that's why i failed my maths

aiyo, macha, don't pull suresh legs macha, no good macha

btw, why macha kchongnz sound like having a cold war with macha iafx ?

Posted by suresh_babu > 2013-04-01 15:59 | Report Abuse

macha lotsofmoney sharing a good eye opening, will take the warning

Posted by kcchongnz > 2013-04-01 16:06 | Report Abuse

suresh,
Volatility is up and down of the price of the share. So if the more violent the movement of the mother share, the better the value of warrants because there is a higher chance for the upside of warrant. There is downside of warrant also when mother shares move down a lot, but for warrant, the most you lose is your initial low capital; but the upside is unlimited. So high volatility of mother share is a good thing for warrant and vice versa. Volatility is mathematically measured as sigma, or the standard deviation of the change in price of the mother share. There are a few option pricing model for valuing warrant which itself is a financial option. The variables are mother share price, volatility, risk-free rate, exercise price, time to expiry. Dividend yield of mother share also come into play for longer expiry call warrant.

Implied volatility means the market price of the warrant equals its value obtained from the option pricing model.

Posted by kcchongnz > 2013-04-01 16:15 | Report Abuse

So if the implied volatility is lower than the historical volatility of the underlying share, it may mean the warrant is under-valued in relation to the mother share. Alas, these are all theories. No need to follow.

Posted by suresh_babu > 2013-04-01 16:42 | Report Abuse

i see, so it involved so many inputs to get the implied volatility, now suresh start to get it but why macha ask suresh not to follow after the trouble of explaining ? very weird macha

so far, what is macha succession rate of making money from CWs using this option pricing model ?

Posted by kcchongnz > 2013-04-01 16:45 | Report Abuse

Recently i kena some call warrants expired with zero value. So I lost quite a bit recently because of that. But overall in punting call warrants, I haven't evaluate the performance yet, but I think still make some, not much already. My long-term investment is doing much better.

Posted by kcchongnz > 2013-04-01 16:50 | Report Abuse

why i asked you not to follow? I can tell you I know the option pricing quite well. The option pricing theory is very complicated one. But in real life trading, actual behavior of option doesn't follow theory. This is also learned through real life events, such as the LTCM saga, the US sublime crisis, and my own experience in punting call warrant. So like what lotsofmoney says, avoid call warrants as much as possible. But tell you a secrete, I will still punt. Just wait for better time sssh.

Posted by suresh_babu > 2013-04-01 17:11 | Report Abuse

what is LTCM saga macha? hahahaha, so you still punt, if you made a mistake, remember to share here, at least suresh will read & won't repeat the same mistake like macha, can save suresh a lot of $$$ for unnecessary trial & error

Posted by mansor80 > 2013-04-01 17:12 | Report Abuse

you guys should ask for mat cendana opinion... hehe

Posted by suresh_babu > 2013-04-01 17:23 | Report Abuse

macha mansor80, who is Mat Cendana ? is he a regular warrant trader?

Posted by kcchongnz > 2013-04-01 17:25 | Report Abuse

Mana Mat Cendana, my call warrant kaki!!!!!!!

Posted by mansor80 > 2013-04-01 17:50 | Report Abuse

Yup Suresh. Mat cendana & Passerby is a regular warrant trader..
Don't know where he is.. lame x dengar..