Posted by Ledzepp > 2012-10-17 10:24 | Report Abuse

All quiet today

Posted by Mat Cendana > 2012-10-22 22:26 | Report Abuse

Exe Price: 9.50; Ratio 8-1; Expiry Date 29/3/13. So, at 0.04, the strike price is 9.82 (0.04 x 8). Is my calculation correct?

Posted by passerby > 2012-10-22 22:39 | Report Abuse

strike price = exercise price = conversion price = RM 9.50 le...:)

RM 9.82 should be your break even price ( excluding exercise cost )

Posted by ledzepp > 2012-10-22 22:41 | Report Abuse

MC - I don't understand all these warrant terminology. But this link may help you http://www.bursawave.com/warrant-calculator/. Incidentally last week I went in at 0.035 and got out at 0.04, enough for a cup of tea. Tried to go in again but so far unsuccessful

Posted by passerby > 2012-10-22 22:45 | Report Abuse

that calculator only works for call warrants. cannot be applied for put warrants

Posted by ledzepp > 2012-10-22 22:48 | Report Abuse

Thanks passerby, like I said I'm totally ignorant

Posted by passerby > 2012-10-22 22:48 | Report Abuse

MC :i guess it should be very boring playing Sime-CR :)

Posted by captros > 2012-10-22 22:55 | Report Abuse

What is the conversion cost. Minimum and insignificant i supposed. How long it take take to get this conversion completed. Time taken more or less similar to right issue or bonus?

Posted by passerby > 2012-10-22 23:12 | Report Abuse

I tried to exercise once for one of the SW I have played - exercise cost should be within the range of the cost of your are paying for your brokerage fees transactions or lesser.

I waited 3 weeks plus to get my cash cheque from the IB.

Posted by captros > 2012-10-22 23:20 | Report Abuse

Thanks. I would cash it out if it touch 5 sens. Wondering why CR is nor responsive to mother. Mother shares has recover fully to level prior to the fall on 2/10/2012. But CR is still stick at 3.5sen not able to move up to 7.0 sen.

Posted by Mat Cendana > 2012-10-23 00:18 | Report Abuse

ledzepp, Thanks for the link. 0.035 was a great price. I went in a bit early at 0.04, then saw big lots being given at the lower price. By the market maker...?

passerby, sure is boring so far. But I'm attracted by the premium and the relatively reasonable time to expiry. The mother just needs to add bit by bit, defend the gains and this one will be in the money next March. Fantasizing for it to be like some of those CWs that keep going up and up - will be delirious should it get to 0.10:-)

Posted by kcchongnz > 2012-10-23 07:15 | Report Abuse

passerby, you are quite good in call warrants. Here is my view.
Sime CR, expiring on 29/3/12, has an exercise or strike price of 9.50 and a conversion ratio of 8. The option value of Sime CR is made up in two parts, its intrinsic value (IV) and the time value (TV). The TV of CR decays as it approaches expiry date and become zero at expiry date. That is why even if Sime price has gone up to the previous level, CR price may not rise up to the previous level. With the closing price of Sime at 9.71 and CR at 4 sen, the premium is 1.1% [(8*0.04+950)/9.71]. IV of the 8 CRs is Max[0, (9.71-9.500] or 21 sen. Hence CR is already in-the-money, which means that if you were to settle CR for cash now, you get back some money, albeit at a loss of 35%. Actually you can’t settle now because settlement can only be effected at expiry date of CR as it is a European style option. Why would one want to buy CR when he will lose 35% if Sime does not go up at the date of expiry? Stupid isn’t it? Not really. CR appeals to gamblers like me.
Let’s say I am willing to come up with RM10,000 to gamble on CR. I will buy 250,000 shares of CR at 4 sen. I will lose RM3,500 if Sime never move until expiry date. Worse if Sime goes down below RM9.50, I lose all my money. Why do I take this risk? Now let’s look at the other way.
A premium of 1.1% means that if Sime can go up by just 1.1%, or 11 sen to RM9.82, I will breakeven. How difficult is it for Sime to rise just 11 sen? What if it rises say 11% to the average target price of many analysts of RM10.80? Huat loh! My CR would make 306% or RM30600. What about if Sime rises to AMMB’s target price of RM13.40? I make RM112000, with a capital of just RM10,000!
Hence my downside is limited to RM10,000, but my upside seems unlimited. However, to make the bet in CR, one must have the bullish outlook for Sime Darby. I, however, take the analysts target price as a guide (not necessarily believing in them). The interesting things about this bet is the relative low premium of just 1.1%, and the huge gearing of 30 times. Punting CR may seem boring for many people because it hardly moves. Sime’s price has to rise up to above certain price first, say another 20 sen before the delta (rate of change of CR with respect to Sime) moves in a big way. However, one day, hopefully one day when there is a spike of volatility of Sime Darby, hell will break loose (just exaggerating only lah).

Posted by ktrader > 2012-10-23 07:28 | Report Abuse

Kudos to you bro....a very good writeup....

Posted by passerby > 2012-10-23 07:46 | Report Abuse

kcchongnz: you really go into details on each SWs :)

The expiry date of this particular SW is does not side retail trader but is more on IB side in my opinion :)

Posted by passerby > 2012-10-23 07:52 | Report Abuse

if you haven't get in, wait till the upcoming EGM over to reduce the risk :)

Posted by Mat Cendana > 2012-10-23 12:38 | Report Abuse

kcchongnz, now you've gotten me excited, with $$ signs in my eyes:-P The mother share may be rather quiet at the moment but it just needs some impetus to be in the limelight again. Positive, hopefully.

It doesn't take too much for a counter like this to add 0.10 in a single trading session. It's also a "must have" counter for many institutions - if these fellows keep adding, and Sime reaches the average TP of 11.06 before the expiry date, it will be a very happy year for me.

Posted by Ledzepp > 2012-10-23 16:11 | Report Abuse

Thanks kcchongnz. I'm seeing lots and lots of $$$ as well. But one question comes to mind - who will pay you the $112,000? Is it the bank who issue the CR? If it is the bank, to avoid paying you, can they purposely depress the mother share? I thought we've seen these happenning all too often.

Posted by kcchongnz > 2012-10-23 16:37 | Report Abuse

Yes, the investment bank who wrote this option is the one who pay you on settlement. In this case is CIMB. Yes again, the bank can actually depresses the share price of Sime Darby the last 5 days before expiry of CR. The lower the average price of Sime, the lower will be the settlement value of CR. So the bank has to continue selling Sime at low price the last 5 days. However, if the bank sells Sime at much lower than the intrinsic value of Sime, other investors will see a cheap sale and buys over. So CIMB will lose by selling Sime cheap too, right? Unless CIMB has already bought a lot of Sime shares to hedge against their position in CR, which I think they are supposed to require to, also as a means of financial risk management. But again even if CIMB has a lot of Sime share, will they want to sell Sime cheaply? So theoretically it is not easy for the bank to manipulate too, especially for a highly liquid stock like Sime. However, we have seen time again and again the manipulation of this market, the most unforgettable one was the DRB Cb some time in April this year, when it appeared that insider just dump DRB shares down by 30% at closing. That made the supposedly deep in-the-money Cb became worthless overnight. But the settlement of DRB Cb was based on the average 5-day closing price of DRB, not the volume weighted average price for CR, which made it easier to manipulate DRB Cb, but not Sime CR. Hope I answer your question.

Posted by momochacha > 2012-10-23 16:40 | Report Abuse

easy... they can buy sell left pocket to right pocket....

Posted by kcchongnz > 2012-10-23 16:46 | Report Abuse

Momchacha, are you sure they can do that? Market manipulation is a commercial crime and can be prosecuted, you know. Again insiders have done that before and nothing happen. Malaysia boleh! But what I am saying for a highly liquid stock like Sime, when even many overseas funds also involve, it is not that easy.

Posted by momochacha > 2012-10-23 16:52 | Report Abuse

Not sure lar... jz a wild guess :)
jz tat in tis bolehland anything can happen, v must think from any possible way jei.....
HOPE FOR THE BEST, PREPARE FOR THE WORST lol

Posted by passerby > 2012-10-23 16:54 | Report Abuse

there is risk doing buy sell left pocket to right pocket :), only if you know how to take advantage on the weakness of this method.

when trade warrants, just make sure you don't go against big funds - else mati katak

if you are taking shelter under big funds movement, IBs won't be able to put a scratch you :), unless you know nothing about about SW & yet jump into the war zone waiting to be slaughter alive

kcchongnz realized which underlying is risky to be manipulated by IB & which one is not risky to be manipulated by IB

Posted by momochacha > 2012-10-23 16:59 | Report Abuse

agree passerby. yet I learn a lot from sifu here :)

Posted by kcchongnz > 2012-10-23 17:13 | Report Abuse

In option, I know a bit of theoretical valuation only. Speak some Greek also(if you know what i mean). This knowledge is just for guidance and over-reliance on them can lead you to Holland. Trading experience is also very important of which I am not sure i have enough or not though I have been trading call warrants for some time (and have made some pocket money, hehe). For trading, especially for derivatives, is a complicated thing, not theoretically, but in the market place where it is subjected to manipulation by insiders and market makers. It is a jungle out there you know. Anybody can be slaughtered kau kau.

Posted by momochacha > 2012-10-23 17:29 | Report Abuse

Posted by Mat Cendana > Oct 23, 2012 12:18 AM | Report Abuse

ledzepp, Thanks for the link. 0.035 was a great price. I went in a bit early at 0.04, then saw big lots being given at the lower price. By the market maker...?

kcchongnz: Prior to 3/10/12, the volume of CR is very thin, and suddenly on 3/10/12 a big chunk of CR being release by market maker (I believe so).... As all of us aware, SW is actually an instrument for IB to make $$$, if their intention is to make $$$, why don't they release the SW in more higher price but at 0.03?? Tat is why I doubt v can earn $$$ from tis SW... jz my 1 sen....

Posted by passerby > 2012-10-23 17:37 | Report Abuse

I do follow theoretical valuation as well, didn't put much effort on Greeks since the value of Greek changes most of the time (too lazy to follow up ), as long as the underlying is in up cycle, not in oversold region, not in competitive environment, & most importantly - speculative elements is present, only will i make the move

i do agree with you that trading experience play an important role when picking a warrant to trade.

if you have traded SWs tracking CIMB, Maybank, HLB, RHB, TNB, IJM, all those big caps , you will realize something :).So is Sime-CR falls under same category ? :)

Posted by passerby > 2012-10-23 17:41 | Report Abuse

lol momochacha, MC going to be very sad tonight

Posted by momochacha > 2012-10-23 17:51 | Report Abuse

mayb i am wrong ;p
again, is jz my wild guess!!

no offense, MC! lol

Posted by kcchongnz > 2012-10-23 17:56 | Report Abuse

momchacha, how you know that CR shares were released by market maker 0n 3/10/12? Yeah why sell you at only 3 sen? CIMB so stupid one meh? I think those Cr shares were thrown by picnic small time punters who saw Sime dropped like nobody's business by 5%. The market is highly controlled by emotion, and not rationale. I picked up some at 3.5 sen and sold at 4.5 sen the same day on October 3 for 30% gain (This was a rare opportunity). You think I gain from CIMB? No way they are not that stupid and emotional. The victims are those small time punters who don't know much about call warrants and punt based on gut feeling. but when market turns, they get panic and blindly run for the exit, leaving their chips behind. Market makers after issuing the call warrants (always at very high price) to unsuspected small time punters, makes the market when there are no quotes from market participants. The bid-asked spread is always very wide to their advantage. Yeah, very difficult to make money from them. Talked about it, I did beat them hands down once when someone from CIMB made a blunder by providing a quote of 16 and 16.5 sen on 18 June this year. I quickly sold them my CR and made a huge profit in percentage term (not really a lot in absolute term). Wonder that guy got sacked or not by CIMB. So if you know about call warrants and an experience trader (I am not saying i am one ah), you can make money from call warrants some time after the initial issuance of the warrants. Not easy though.

Posted by momochacha > 2012-10-23 18:00 | Report Abuse

perhaps I have a lot more to learn about SW, need to learn from sifu like you ler :)

Posted by passerby > 2012-10-23 18:03 | Report Abuse

both of them are still holding the CR :) lol

you can only verify how much CIMB release CR on 03/10/12 next month when they announce the monthly market makers report

Posted by gajah > 2012-10-23 20:15 | Report Abuse

kcchongnz - tq for the explanation. Are you watching Axiata-cr? What's your calculation?

Posted by kcchongnz > 2012-10-24 05:35 | Report Abuse

Elephant, Axiata cr was issued bu Ambank very recently at 15 sen. Look now it is quoted as 8 sen only. Is it hell of a bargain? Heck, even at this price of 8 sen, it is still the most expensive call warrant until Axiata group!! Premium is at 11.3% as Axiata closed at 6.65 yesterday. The premium appears to be low, or is it? Not at all for Axiata call warrants because the historical volatility of Axiata is not high enough. Expiry is more than a year to go, huge time value? Not at all if you lookk at its Greeks. With the exercise price of 6.20 which means this option is in-the-money. However at a conversion ratio of 15, not a gearing of just 5.5 times, bad deal. If you are bullish about Axiata, why choose cr when the rest of Axiata call warrants are much more attractive? Hope you understand what i am saying.

Posted by gajah > 2012-10-24 06:58 | Report Abuse

Thanks kcchongnz. These IBs are really fishing for big marlin. Thanks for people like you educating others from getting grilled.

Posted by kcchongnz > 2012-10-24 07:27 | Report Abuse

"fishing for big marlin"
Good phrase. great to learn this from you. Yes, don't be a fool to buy new call warrants issued by IB. All selling at very high implied volatility relative to the historical volatility of the underlying shares, meaning hell of expensive, to the naive punters. I wonder why Bursa never bother to protect the public from the vultures.

Posted by Mat Cendana > 2012-10-28 21:36 | Report Abuse

TA Securities has come up with this TP for Sime - 11.46! http://klse.i3investor.com/servlets/ptres/11296.jsp These analysts from the various investment banks have had their hits and misses but if this one does get to the TP before the CR expires, this could turn out to be the best trade I've ever made.

Posted by captros > 2012-10-29 00:39 | Report Abuse

Mat, Sime performance last year was fantastic. Can they match or exceed last year achievement this year. Was told that their Management is proposing an management performance reward system (million of share to Chairman, CEO, Vice presidents etc), a reward to the top brass. It look like another good year for sime?

Posted by beginner_1 > 2012-11-01 10:42 | Report Abuse

how come today never move?

Posted by ledzepp > 2012-11-28 10:44 | Report Abuse

Sime-CR @ 2sen. Any opinion?

Posted by Mat Cendana > 2012-11-28 10:55 | Report Abuse

0.02 is better than 0.04. Will be in the money if Sime gets to 9.60. Your guess is as good as mine, but I feel it's definitely achievable with a counter like this. However, have to consider the present general market sentiments. It's definitely a bearish trend where low might become lower. At the same time, there's the year-end window-dressing period to consider... if it does happen. And with four months left to the warrants expiry, CR at this price is a reasonable bet.

Posted by ledzepp > 2012-11-28 11:10 | Report Abuse

Thanks MC. With the possible delay in the GE, I could detect a sense of relief, and the index has improved. The Telcos are 'flying'; hopefully to be followed by the others, may be Sime as well. How low can CR go? Obviously, 0.015, 0.005 or 0.000; which are quite small in my opinion. Unfortunately, my bullets are low.

Posted by Mat Cendana > 2012-11-28 11:14 | Report Abuse

Yeah, I was surprised to see some of the quality counters suddenly clawing back and exceeding yesterday's close. The telcos, SK Petro etc. No sign of that with Sime yet - I'm in a dilemma as to whether to buy the CR at this price or wait. Darn! I hate the indecisiveness.

Posted by passerby > 2012-11-28 11:17 | Report Abuse

ledzepp & MC: not worth the risk this one, the expiry date doesn't side us the retail trader. that 4 months is the exactly the uncertain period of GE to be call anytime. As friendly advise, if got chance to escape, escape this Sime-CR. go after the underlying instead where you can hold forever.

Looks for Petgas-CG, my entry yesterday is at 0.09. Regardless how fund managers dump this last few days, they still will come back after profit taking unless they can find something better to replace Petgas in their portfolios.

Posted by Mat Cendana > 2012-11-28 11:22 | Report Abuse

Thanks, passerby. You helped make the decision for me. It's okay even if it were to go up after this. I can live with that - had missed so many others before:-) It's the indecisiveness that really troubles me. Anyway, I think I'm going to just watch and keep the remaining capital for future opportunities.

Posted by ledzepp > 2012-11-28 11:27 | Report Abuse

Tq passerby. Perhaps holding cash is better right now; diving only if a big catch is guaranteed

Posted by passerby > 2012-11-28 11:27 | Report Abuse

all my watch list are in red yesterday except this 2 - Three A Resources & Oldtown. You might want to consider that during the uncertain period

Posted by kcchongnz > 2012-11-28 13:41 | Report Abuse

There is a double whammy for Sime CR today. First it is the adjusted price ex-dividend of 20 sen I think, and then further drop of 17 sen more for Sime. This affects the price of cr. The earlier one is expected and should have been incorporated into the price of cr whereas the later was not expected. In percentage wise the loss of cr is very high as expected because of the high effective leverage about 20 times. cr at 2 sen when Sime at 9.08 is still worth a punt to me (i am really a gambler) with premium of 9.4% and effective leverage of 25 times. To appreciate this one must understand the mind of a gambler. The only problem is the impending general election which makes a lot of people nervous about the equity market. But then again this uncertainty might have been incorporated into the price already. When Sime price get closer to 9.50, the exercise price, the % change in cr in relation to Sime is very high.

Posted by ledzepp > 2012-11-28 14:38 | Report Abuse

Thanks kcchong. Currently, 2,000 on offer at 2 sen. Buy cost about RM4,000 + fees. A 0.5 sen increase - you'll stand to make about RM900. Will it rises 0.5 sen? Go or no go? What's in the gambler's mind?

Posted by kcchongnz > 2012-11-28 14:51 | Report Abuse

ledzepp I really don't know whether cr will rise to 5 sen or not. That depend on the performance of the underlying share Sime. RHB today gives a target price of Sime Darby at RM10.30. If you buy cr at 2 sen and keep for 4 months until expiry and Sime rise up to RHB target price, you would have made 400%! Of course in between you might be able to sell cr at high price and even make more profit. That is the "hope" of a gambler's mind.

Posted by ledzepp > 2012-11-28 15:01 | Report Abuse

kcchong, MC - now with the slide in Sime, I think you can get CR at 0.015. And kc - I'm looking for a rise of HALF sen, not 5 sen, in my calculation.