O'Mighty Capital Articles Archive
Warrants Cheating Traders?
We saw the top article trending saying that the warrants are a scam.
Particularly it not a scam it's just because people don't quite understand what they are trading.
Let’s take a look at the example below.
Lower Premium Equals Good? Not Really…
What Xeno put up was true saying that as a trader we should pick the one with lower premium.
You are better off picking the warrant with the lower premium if you plan to hold until maturity.
But the problem is both is Out of The Money and you plan to make a quick flip!
This is where the market maker will take a bet on your call.
The market maker wouldn’t adjust the price up if it thinks that the strike price will not hit. Indeed your conversion price plus strike is much lower than C47 but it’s of no use if it doesn’t go above it.
Don’t Just Stop at Premium
There’s one very important factor that determines price which is implied volatility (IV). The IV for C47 is so much higher which meant that it would go up more than C46 if GENTING rises.
The easier metrics is looking at Delta. The higher it is, the more reactive it is to the mother share price.
|
|
C46 |
C47 |
|
Premium |
10.1% |
13.7% |
|
Implied Volatility |
19.2% |
32.8% |
|
Delta |
24.1% |
33.2% |
To Answer Your Questions
-
C46 does not have to flip its price the same rate as C47. C47 flip because it should move faster due to its IV. Example: A 10% rise for C46 - 0.025 is merely 0.0025 = 0.0275 but a 10% rise for C47 - 0.04 is 0.004 = 0.044. Even by the percentage of rise, a 0.04 value warrant should move faster in value.
-
As a warrant trader, you should choose right warrant which moves faster where you can make a quick flip. If you plan to exercise, then you should choose lower premium. If you hold C46 to maturity I don’t see why any pricing is an issue to you.
The Other Side of The Story
Malaysian market makers could be considered 'kind' versus what you see in the HK market. In the HK market, they can lower the IV on the fly to make you take an instant loss.
Assuming that they are market makers to the underlying stock itself, they would have known how many stock they need to get rid of in their account.
You could be buying HSBC warrants from Goldman Sachs and it adjust the IV lower making the price of the warrant lower as well, they probably knew that they are going to unload 50 million shares of HSBC over the next week or so meaning that they could pre-adjust the warrant price to match their unloading level.
But this doesn't mean Malaysian MM's can't be doing so in the near future.
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More articles on O'Mighty Capital Articles Archive
Most Common Misconception on REIT, A Retail Investor’s Problem
Created by omightycap | Jul 19, 2019
Discussions
3 people like this. Showing 45 of 45 comments
CIMB claim of no manual interventions and the bid and ask prices are set by preset parameters the matrix are all lies.
2018-04-19 11:42
bid and ask prices are set by preset parameters the matrix are all lies - this is very true... playing warrants you have to abide with their game rules...
2018-04-19 11:57
I believe no counter in bursa can gain 100% within a day, but the power of warrant allows you to do that. The manipulative abilities on IB's side is the hidden cost you pay... On the bright side, you get high leverage ability with little money, no stamp duty to be paid. Use the tools wisely not every market is a warrant's market
2018-04-19 12:00
What game rules??
The IB change the matrix as they see fit to their own advantage.
The IB can even suddenly ceased mm claiming there is already enough liquidity.
2018-04-19 12:00
The IB change the matrix as they see fit to their own advantage.
The IB can even suddenly ceased mm claiming there is already enough liquidity.
Yes... This is the reality and the price to pay for leverage ability
2018-04-19 12:02
If you read the last part of this article "The Other Side of The Story"... You can see how much of a crook they can be in HK
2018-04-19 12:05
So it is very common that the warrant could be at say 0.30 when the mother was at 1.00.
And you bought the warrant when it went down to 0.20 thinking that it will go back up to 0.30 when mother is 1.00 again.
But alas when the mother is at 1.00 again the warrant price is no where near 0.30 because the IB has sold a lot of the warrant at 0.20 and below.
2018-04-19 12:07
Yes... This is the reality and the price to pay for leverage ability
No how can this be? How is this acceptable?
It is daylight robbery.
2018-04-19 12:09
Similar as what I've advised traders, the market maker queue there but didnt ask you to buy. It might be a trap it might be not, you take the risk
2018-04-19 12:12
This is not acceptable.
It is changing the goalpost as the IB like.
Everyone who has incurred a loss due to this manipulation must complain to SC and Bursa.
2018-04-19 12:14
Be very clear it is not risk that you are taking when the counter party cheat.
2018-04-19 12:16
Short,
They can sell any price they want, nobody ask you to buy. The IB's make the most money from warrants obviously.
No need what not acceptable etc.
You want to beat IB? Hold to maturity, if you can do it lah.
2018-04-19 12:16
SC & Bursa are well aware of this... you have to understand the IB's have an edge as this product were made for them to hedge, not for you to buy a million warrants and run 0.1 higher. Similarly you made a bet on them they also allowed to make a bet on you. This is the markets. You want fairness maybe Genting more fair than the markets
2018-04-19 12:17
You want to beat IB? Hold to maturity, if you can do it lah.
Hold to maturity the IB will manipulate the mother price close to maturity. Another cheat.
2018-04-19 12:20
The SC laments low participation of retailers but then allows IB to take advantage by moving the goalpost and killing the retailers.
2018-04-19 12:23
The rules must be changed and made fairer otherwise call warrants must be banned.
Else SC is responsible for killing the retailers.
Take note SC.
2018-04-19 12:24
its like you can complain all you want to SPR that Pakatan won 51% of the votes in GE13 but not 51% of the parliament seats!
2018-04-19 12:25
I agree call warrants should be ban.call warrants is a tool that enrich the investment banks only.instead of helping the poor,this only enrich the rich
2018-04-19 12:30
Blog: Warrants Cheating Traders?
The answer is a big YES
With the help of SC and Bursa
2018-04-19 12:30
call warrants is a big scam.....no benefit to shareholders,no benefit to the companies,only benefit investment bankers.
2018-04-19 12:37
Omighty, where do you get implied volatility and Delta of c46 and c47.
CIMB replied to my email stated that C46 has 24% Delta and C47 has 19% Delta.
2018-04-19 22:20
An equation also provided by CIMB : change in theoretical warrant price = change in mother price x Delta / conversion ratio. Since c46 has higher Delta and lower conversion ratio, c46 should have more volatility and should flip faster than c47
2018-04-19 22:23
This is real money
Date: 2018-04-18 15:15:42
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From: 0xba1af695bcec8e8af927dce6f40cb6b41f8fe5e2
To: 0x620f51bc0bb264dfa15aae9775fd2afddbbcae75
Date: 2018-04-17 20:28:52
Token: Smart Exchange
Value: 7.285 SDE
Tx: 0x602c764607e1686178547b9fe2144b89a3bad1b66ed3c9b167fa103ee7a14370
From: 0x1882610e16bcbae7742f244b16347454288ebce7
To: 0x620f51bc0bb264dfa15aae9775fd2afddbbcae75
Date: 2018-04-15 18:22:43
Token: Vestarin
Value: 75.00 VST
Tx: 0x7524be0c300fb6a39e7a5f10a6e0a6f0c964bd1616f6c3def9f81eac8c55cdc4
From: 0xde08a96e974bad18f64013d5b59b3c8e3f4621f8
To: 0x620f51bc0bb264dfa15aae9775fd2afddbbcae75
Date: 2018-04-15 17:23:36
Token: Vestarin
Value: 76.00 VST
Tx: 0x855c6466facd79b62ee00a8a46c5b4a323be96a26fe9e81bbeacca75db4682d6
From: 0xde08a96e974bad18f64013d5b59b3c8e3f4621f8
To: 0x620f51bc0bb264dfa15aae9775fd2afddbbcae75
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2018-04-19 22:27
apolloang I agree call warrants should be ban.call warrants is a tool that enrich the investment banks only.instead of helping the poor,this only enrich the rich................same with casinos and Genting...but still got Genting......hahahaha.
2018-04-19 22:33
Xeno check malaysiawarrants.com.my by Macquarie. If CIMB really send you those numbers then they are bull shitting you... really time to complain
2018-04-19 23:34
you can email us a copy... omightycap@gmail.com We will post on our site for everyone to see what numbers they gave you
2018-04-19 23:36
Bukan saja waran yg menipu sebenarnya tapi seluruh sistem operasi di bursa cuma mereka ada lesen utk menipu.isunya ialah adakah kita boleh melepasi skill menipu mereka supaya kita berpeluang buat duit.jika rugi bermaksud skill mereka lebih tinggi dan terima sajalah sebab semua pihak termasuk sc,bursa dan banker bekerjasana ttg bagaimana cara utk buat duit dgn cara menipu pelabur
2018-04-20 03:09
The IV and Delta is more applicable IF the warrant is in the money. In this case of C46 and C47 are way way below the exercise price. The movement therefore cannot follow closely to the theorical IV and Delta, but more of willing buyer.
When someone bought C46 sometime back, I am sure it was much cheaper than C47, why didnt complain then?
The premium will decrease as the warrant expiry date nears. So do not expect the warrant to go back to the same price when the mother share recovers.
Holding on to maturity as suggested by the writer, again only applicable if the warrant is in the money.
Call warrant is just another instument of the financial market to increase market activity and volume. Knowing the movement of the mother share and the timing of buying in and selling of warrant is crucial if one wants to make money out of warrants.
Lastly, be prepared to lose all the money when buying in warrant, else stay away.
2018-04-20 06:17
the above statement is also true... out of the money means the market maker can do anything to you like lowering bid. The rule is to provide liquidity, thats all!
2018-04-20 08:40
Yes..I kena many times d playing this call warrants..most of the time, lose money..how could they ask us to buy warrants but at the end of the day, all of our money kena "songlap" cow2 by this bankers,sc n.bursa..retailers always the victim...best thing,stay away from this warrants ..
2018-04-20 09:27
everything is turning into a scam in msia now. bursa,money game,4d....all swindle retails money until broke and only the rich cronies getting richer and richer.only fools vote for the crooks
2018-04-20 10:19
even IPO also scam, good one cannot get a lot,bad one all give u like LCTITAN.....all are fixed to cheat the rakyat
2018-04-20 10:33
apolloang > Apr 20, 2018 10:33 AM | Report Abuse
even IPO also scam, good one cannot get a lot,bad one all give u like LCTITAN.....all are fixed to cheat the rakyat
==========
there is a word for that....it is called capitalism
2018-04-20 10:55
bursa allow this for the cronies to cari makan,that is why rakyat must vote for PH
2018-04-20 11:26
Apprentice
Call warrant is just another instument of the financial market to increase market activity and volume. Knowing the movement of the mother share and the timing of buying in and selling of warrant is crucial if one wants to make money out of warrants
Mother movement is not the issue the issue is IB changing the parameter constantly to secure profit for itself.
Shifting goalpost again again as necessary.
If you buy big enough you will have the feeling you are being tracked by the IB and very likely can only sell to other players as the IB lowered its bid.
2018-04-20 16:48
increase market activity,mother stock can split or give bonus to improve liquidty and also benefit to the shareholders. call warrants being issue shareholders and company got nothing.only IB will benefit from nothing
2018-04-20 16:53
that's why IB people support BN,all benefit them making millions,retailers and the poor only get brim.....the poor shall forever remain poor.UBAH
2018-04-20 16:58
North Korea 'halts missile and nuclear tests', says Kim Jong-un
http://www.bbc.com/news/world-asia-43846488
2018-04-21 08:12
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Short
No the real problem is IB especially CIMB manipulate the matrix to manipulate the bid price and quantity on a daily basis depending on how many of that call warrant they have sold.
For instance it can be so generous with the bid price and quantity when it cannot sell any of the warrant.
But once it have sold a fair amount of that warrant it is different story. The bid price and quantity will be lower when mother is at the same price.
Matrix 100% is being manipulated.
2018-04-19 11:37