Posted by probability > 2017-06-08 18:59 | Report Abuse

people write so lengthy with so much information...you just come and comment like this... a little politeness does not make you so down rMoi

furthermore the writer already mentioned he does not welcome abusive comments...

Posted by Frank Soweto > 2017-06-09 07:05 | Report Abuse

Very good sharing Jay. One of the very few better bloggers in i3.

Posted by Dragon88 > 2017-06-09 07:20 | Report Abuse

Hi, Jay, Thanks again for the write up and it was educations.

I have a question for you and if you dont mind answering, what are the costs involved if I were to hold a call warrant until expiry. If the Call Warrant is in the money, the IB would need to pay the difference between the exercize price and the weighted average 5/6 day closing price of the stock before expiry. The cost would be the cost I paid to buy the warrant and the conversion ratio.My question is, is there any other hidden cost like admin fees, brokerage fees etc?

Thanks and would appreciate if you are able to help. :)

Posted by kcchongnz > 2017-06-09 08:02 | Report Abuse

Very good educational article.

Buying company warrant can be considered as investing as one can convert it to mother share whenever he wishes. Hence for me, whether a company is a good company matters.

Call warrant is pure punting in my opinion. I like to do punting to have a little excitement too, but I will never advise anyone to punt, unless you have a little advantage as Jay does, knowing what make up he value of a call warrant.

For punting of call warrant, the quality of a company doesn't matter as much for me, but its price movement in the near future matters more; is its share price going to rise in the near future, after considering everything such as premium, gearing/delta, time to expiry etc.

Note price doesn't equate to value, especially short-term price movement. Call warrant is basically short-term instrument. In US and other matured option markets, call warrant is what they term as option, and options are basically very short-term, and three months expiry or less are very common.

In this respect, good TA may be more important than FA, much more.

Posted by gohkimhock > 2017-06-09 08:40 | Report Abuse

Very good article. This is the type that we need to see in i3. Not those rubbish posted by "someone"

Posted by Jay > 2017-06-09 08:42 | Report Abuse

@Dragon88 I don't think there is any costs involved if you hold it till expiry. You will only incur the brokerage costs when you bought it earlier. However, it's best to confirm with your brokers as things may have changed over all these years. I have never held a call warrant till expiry because like I mentioned, premium would collapse in the last month. most call warrants expire out of money. It's usually better if you sell it earlier, unless you are very sure something big will happen in the last month before expiry.

Posted by Jay > 2017-06-09 08:52 | Report Abuse

@kcchongnz thanks for the comments. yes call warrants are more speculative, that's why I mentioned the company you like must have price appreciation potential in the short term. even though FA sometimes teach you to go contrarian, never do that when you buy call warrant. do not go against the trend.

however if you buy a call warrant that expire in 6-9 months, you should go through at least 1 or 2 quarterly earnings and if they are good, then the price will move. for beginners especially should go for longer expiry as possible to buy time

my TA is not that strong, so I perfer to rely more on FA. with good FA support, even if the price doesn't go up, it shouldn't fall too much, so my risk reward ratio is effectively higher.

Posted by Jay > 2017-06-09 09:04 | Report Abuse

@Dragon88 just to elaborate on my point, imagine if a stock trading at RM1.50, exercise price RM1, exercise ratio 1 to 1. the warrant trading at RM0.60 or 6.7% with 1 month to expiry. if the stock held steady at RM1.50, the warrant value will slowly trend down toward RM0.50. If you hold until expiry, you are expecting stock to trend above RM1.60. say if it close at RM1.58 on last day, your warrant eventually only get RM0.58 even if it ends up in the money. anything below the breakeven price of RM1.60 at expiry it is better for you to sell the warrants earlier.

if you are interested on the topic on options time decay, you can google it. my general advice is don't hold until expiry unless you are reasonably quite sure.

Posted by ks55 > 2017-06-09 09:21 | Report Abuse

Good article to follow.
Why not consider Kimlun-WA?



Stock: [PUNCAK]: PUNCAK NIAGA HOLDINGS BHD
Jun 5, 2017 03:28 PM | Report Abuse

Sell PN.
Take the proceed to look for better prospect.

KimLun will be earning more next year.
Go for KimLun-WA for it still has 8 years lifespan, with 4% premium over the mother share.

Plenitude is good.
Tsunami sheltered counter with good potential on Taman Desa Tebrau.

KSL and Crescendo also good. Good cash flow and having very cheap development land.

Jtiasa having more and more acreage of oil palm plantation reaching maturity.

Reits are good. They give you consistent and reliable dividends payout.

Don't buy Xinquan. It is going to suspend next Thursday (8th June 2017) for failing to release QR.


So there are thousands and one good alternatives.
Why still want to pray for something which you will not be answered?

Posted by connie > 2017-06-09 09:49 | Report Abuse

always wonder the criteria of selecting a warrant and JAY has provided crystal clear guideline !! once again, a mil thanks for the great effort :)

Posted by Dragon88 > 2017-06-09 10:04 | Report Abuse

Thanks Jay for your respond and for your insightful explanation.

The reason I am actually thinking of holding the call warrant i bought till expiry is because it is actually trading at discount (negative premium) compared to the mother share, i.e. if the cw expires today, I would make more money compared to its current warrant price.

Thanks again Jay for the info and explanation. :)

Posted by yoloisreal > 2017-06-09 10:07 | Report Abuse

Hi jay, may i know the formula to calculate "price movement for every 1% movement for mother" in table?

Posted by kcchongnz > 2017-06-09 10:13 | Report Abuse

Posted by Dragon88 > Jun 9, 2017 10:04 AM | Report Abuse
Thanks Jay for your respond and for your insightful explanation.
The reason I am actually thinking of holding the call warrant i bought till expiry is because it is actually trading at discount (negative premium) compared to the mother share, i.e. if the cw expires today, I would make more money compared to its current warrant price.
Thanks again Jay for the info and explanation. :)


I held call warrants to expiry a number of times, precisely because of the discounts and leverage they offered. There is a small settlement cost.

Ensure the mother share is very liquid such that it cannot be manipulated in price the last few days, for example it is hard to control the price of AirAsia, Genting or TopGlove.

Posted by Dragon88 > 2017-06-09 10:17 | Report Abuse

Thanks kcchongnz for the explanation. I am an avid reader of your articles posted in i3 as well. Thanks again :)

Posted by paperplane2016 > 2017-06-09 10:26 | Report Abuse

GREAT! CONGRATS again to JAY, you the best

Posted by Jay > 2017-06-09 10:26 | Report Abuse

yes, like what kcchongnz has mentioned. don't forget your last trading day is 3 market days before expiry. so last 3 days your hands are tied and can only watch on the sidelines

Posted by paperplane2016 > 2017-06-09 10:28 | Report Abuse

THIS IS A MUST READ ARTICLE in i3!

Posted by Alex > 2017-06-09 10:29 | Report Abuse

tq Jay for your sharing.

Posted by Jay > 2017-06-09 10:33 | Report Abuse

@yoloisreal say a warrant is 2 for 1, if the premium is maintained, every 2 sen movement in mother the warrant should move 1 sen. so if 1% of mother now is 5 sen, warrant technically should move 2.5sen, so you divide 2.5sen over current warrant price to get the % movement.

in real life, all price movement is subject to supply and demand so premiums will fluctuate constantly

Posted by Jay > 2017-06-09 10:33 | Report Abuse

2 for 1 exchange ratio

Posted by yoloisreal > 2017-06-09 10:55 | Report Abuse

@jay appreciate your sharing :)

Posted by Jay > 2017-06-09 11:00 | Report Abuse

the most important rule in investing/trading, know what you are doing. if you are unclear, please seek help or just avoid it, no matter how attractive the potential returns are

Posted by probability > 2017-06-09 11:19 | Report Abuse

even if it turns out bad after doing this way...at least u will know the reason...enabling u to improve-refine your competence on what 'you thought' u know well.

Posted by Jay > Jun 9, 2017 11:00 AM | Report Abuse

the most important rule in investing/trading, know what you are doing. if you are unclear, please seek help or just avoid it, no matter how attractive the potential returns are

Posted by andrew_how25 > 2017-10-09 08:33 | Report Abuse

Hi Jay, your these 2 sharings really help alot understanding on warrant especially CW selection...by the way, do u knw how the IB make profit by issuance a CW. Just wish to understand more on how their position as Issuer since most of the time, they are the one control over the supply & demand over the CW on market...

Posted by Alex Foo > 2017-10-09 08:36 | Report Abuse

tq Jay.

Posted by joetay > 2017-10-09 08:46 | Report Abuse

another good refreshing course article by jay, thx.

just like to point out that liquidity is sometimes very thin and thus a big issue for call warrants.

Posted by apolloang > 2017-10-09 08:50 | Report Abuse

call warrants is gambling,better bet in casino than trade on these kinda things.

Posted by Hermit > 2018-01-26 01:07 | Report Abuse

Thank you for the share :)