Posted by MalaysianKerbau > 2013-11-25 12:34 | Report Abuse

Averaging up on Dayang-cf since early oct 2013. Lowest I bought was 0.36 while the highest was 0.44. Right now thank god its still above my average price. Will cash-out hopefully once mother share reaches 5.80-6.00 before CNY. Amen

Maturity Date: Apr 22, 2014
Issue Size: 100,000,000
Exercise Price: MYR 3.18
Ratio: 5:1

Posted by nightshade > 2013-11-25 14:02 | Report Abuse

@MalaysiaKerbau...if i were you, I might consider switching to Dayang-CI for better gearing exposure since you are so confident about underlying reaching RM 5.80 to 6.00 before CNY.

of course, you might need to pay higher premium in the exchange of higher gearing & longer lifespan

Posted by MalaysianKerbau > 2013-11-25 15:30 | Report Abuse

@nightshade, I decided on CF as at that time, the call warrant was trading at a discount to the mother share.

Posted by kcchongnz > 2013-11-25 15:31 | Report Abuse

Long time never look at call warrant already, especially AirAsia's.

Posted by FastMoneyMaker > Nov 25, 2013 12:30 PM | Report Abuse
All trading master, anyone have monitor Airasia-C4, can keep me some comment also teach me how's the conversion show like??? Thanks a lots.

Wow, there are so many call warrants of AirAsia, all trading at a few sens. Investment banks must have made a bundle from these.

Dabbling in call warrants is really a gambling endeavor. Many uninformed punters lose a lot of money. There is no doubt about it.

So for AirAsia call warrants, there are so many. Which is a good punt (if you still insist to punt)?

Yeah C4 is a good choice; high gearing at 40 times. But with a premium of 35%, make sure you know at expiry in 6 months time, AirAsia must go up by that percentage before you can make money. Of course you can sell any time before expiry of the CW if you can make money.

If you are not that risk taking type, you can buy C8 instead which has a lower premium of 19.3%. But it is not that exciting as its gearing is only 10 times. Actually 10 times gearing is also quite high already.

CW Price Ex-Price Ex-Ratio Expiry date Premium Gearing
C4 0.020 3.150 3.000 30/05/2014 34.9% 40
C8 0.080 2.600 3.00 31/10/2014 19.3% 10

Posted by FastMoneyMaker > 2013-11-26 21:43 | Report Abuse

KC thanks 4 ur information, but i still not very sure how the CW game play rule, can anyone pls, show me a example like C4, when till expiry date, AA share need to above what lvl then can consider can make money, if make, how's the conversion will look like?? Thanks.

Posted by kcchongnz > 2013-11-27 04:43 | Report Abuse

FastMoneyMaker,

Stay out of call warrants. It would most probably be a fast money loser for you.

Posted by CityTrader > 2013-11-27 07:45 | Report Abuse

Morning gud kcchongz, i never trade call warrants n tq for reminder.

Posted by kcchongnz > 2013-12-02 16:42 | Report Abuse

Maybank Call warrants as at 2 December 2013.

The following Table 1 shows the prices of Maybank and its call warrants at 4.00pm:

Table 1: Prices of call warrants of Maybank
Warrant Price Ex-Price Ex-Ratio Expiry date Premium Gearing
C1 0.065 9.400 10.000 10/01/2014 2.4% 15.1
C2 0.045 10.500 5.000 30/06/2014 9.3% 43.6
C3 0.055 10.500 8.000 22/07/2014 11.5% 22.3
C4 0.085 9.500 12.000 24/10/2014 7.2% 9.6
CY 0.250 8.900 4.000 28/02/2014 0.9% 9.8
CZ 0.175 9.000 6.000 21/03/2014 2.4% 9.3

*CY has the lowest premium at 0.9% and 3 more months to expire. This warrant has the lowest risk. However it has one of the lowest gearing at about 10 times.

*C2 and C3 has approximately the same time to expiry. However C2 is trading at lower premium (9.3%) and a much higher gearing at 44 times. Hence C2 is a better risk and reward punt than C3.

*C1 and CZ has the same premium at 2.4%. C1 has a much higher gearing at 15 times than CZ at 9.3 times and is more exciting to punt. Note CZ has a longer expiry date though. It is individual preference which to choose.

*C4 has the longest time to expiry and a lower premium at 7.2% than C2 of 9.3%. However, its gearing is relatively lower at 9.6.

A risk averse punter will choose CY if he is bullish about Maybank share price. This is because of its very low premium of less than 1%. Moreover CY still has a relatively long time of 3 months to expire. I would say there is high chance for CY punters to make money on this leveraged bet.

A risk taker will prefer to punt on C2. This is because it has a very high gearing of 44 times. It has a long time of 7 more months to expire. If Maybank share price can go up by 9.3% before the expiry of C2, punters of C2 will be highly rewarded because of its high leverage nature. I personal will prefer to punt on C2. I think the chance for Myabank share price to be above RM10.50, the exercise price of C2 is reasonably high.

Appended Table 2 below is the gain/loss of each Maybank call warrant with different prices of Maybank at the expiry of the respective warrants.

Table 2: Warrants payoff
Maybank 9.000 9.490 9.81 9.920 10.05 10.73 11.00 11.50 12.00
share gain -8.3% -3.3% 0.0% 1.1% 2.4% 9.3% 12.1% 17.2% 22.3%
C1 -100% -86.2% -36.9% -20.0% 0.0% 104% 146% 223% 300%
C2 -100% -100% -100% -100% -100% 0.0% 122% 344% 567%
C3 -100% -100% -100% -100% -100% -48.9% 13.6% 127% 241%
C4 -100% -100% -69.6% -58.8% -46.1% 20.1% 47.1% 96.1% 145%
CY -90.0% -41.0% -9.0% 2.0% 15.0% 82.5% 110% 160% 210%
CZ -100% -53.3% -22.9% -12.4% 0.0% 64.3% 90.5% 138% 186%

KC Chong

Posted by nightshade > 2013-12-02 17:01 | Report Abuse

you arrived at Maybank-C2 in the end ....

DRB-C1 & CZ under monitoring today, what say u? there are more players in C1....bid range very tight, different by 0.005 only

Posted by kcchongnz > 2013-12-02 18:26 | Report Abuse

I now know that you are interested in longer duration call warrants such as C1 and CZ. They are trading at about the same premium. I prefer CZ over C1 because of the better profile of CZ then C1. It has a higher gearing too. But of course liquidity in warrant trading is also very important. In this case, C1 is better.

Looking at the rest of the call warrants of DRB, I personal prefer CW because of its low premium of 0.7% only. Its profile is also very good with the second lowest volatility. Gearing is also high at 18 times. It still has more than one and a half month to expire.

CT is even more exciting if you can get it for 1.5 sen. I doubt you can get it. It has only one more day to trade. After that you just have to wait for the settlement prices for another 3 days.

Posted by nightshade > 2013-12-02 19:32 | Report Abuse

longer life span is a preference, I do go for shorter lifespan CW occasionally

Posted by MalaysianKerbau > 2013-12-13 16:14 | Report Abuse

Cashed the remaining balance of my Dayang-CF today, average buying price 0.41 average selling 0.47. 100% liquid now awaiting the correct time to re-enter after the fed meeting/QE talk.
Good luck guys

Posted by kcchongnz > 2013-12-17 19:27 | Report Abuse

Tenaga Call Warrants 17/12/2013

Just read a report by TA Securities on Tenaga in the appended link below:

http://klse.i3investor.com/servlets/ptres/20160.jsp

TA gave a target price for Tenaga at RM13.23, up by 20.1% from the closing price today at RM11.02. This is due to the announced tariff hike by the government recently. This prompted me to look at its leveraged instruments, the call warrants of Tenaga, to see if they are some good punts.

There are presently 6 Tenaga call warrants listed in Bursa, C2 through C7 with their present prices and profiles as shown in Table 1 below:

Table 1: Profiles of Tenaga call warrants
CW Price Ex-Price Ex-Ratio Expiry date Premium Gearing
C5 0.345 9.00 6 29/08/2014 0.5% 5.3
C6 0.195 9.50 12 30/06/2014 7.4% 4.7
C7 0.115 10.50 16 15/12/2014 12.0% 6.0
C2 0.810 6.90 5 31/12/2013 -0.6% 2.7
C3 0.970 7.10 4 31/03/2014 -0.4% 2.8
C4 0.630 7.77 5 30/05/2014 -0.9% 3.5
Tenaga share price at RM11.02 at the close on 17/12/13

Which call warrant of Tenaga has the best value?

Three of the call warrants were traded at discounts. They are C2 (-0.6%), C3 (-0.4%) and C4 (-0.9%). Out of these three, C4 is obviously the better punt with the highest discount of 0.9%, the longest expiry time, and the highest gearing. Punters of these three warrants are given free time value which is valuable as they are still a long way to expiry, except for C2 which has only two weeks to expiry. Talk about free lunch in investment.

For the other three warrants, C5 is obviously better bet than C6 as it has a much lower premium at 0.5%, two months longer to expiry on 29/8/14, and a higher gearing at 5.3. C7 has the highest gearing of all at 6.0 and the longest time to expiry on 15/12/13.

One of the ways to determine which warrant of the same underlying share has better value is to use the Black-Scholes Option Pricing Model. Using a volatility of 25% for Tenaga, risk-free rate of 3.5%, and dividend of 30 sen per year, the option values and the respective premium of the three warrants are shown in Table 2 below:

Table 2: Option Pricing
CW CW price Option value Ex-ratio CW value Pre/Dis
C4 0.630 3.247 5.0 0.649 -3.0%
C5 0.345 2.200 6.0 0.367 -5.9%
C7 0.115 1.352 16.0 0.084 36.1%

The analysis shows that C5 is the best punt followed by C4 as they are traded at discount to the value obtained from the Black-Schole Option pricing Model. C7, though at the highest gearing, it requires the underlying share price of Tenaga to move in a very big way to have a positive outcome.

The following Table 3 shows the payoff of each call warrant at expiry date:

Table 3: Payoff at expiry dates
Uly Price 9.00 10.00 11.02 11.50 12.00 12.50 13.00 13.23
Tenaga -18.3% -9.3% 0.0% 4.4% 8.9% 13.4% 18.0% 20.1%
C5 -100.0% -51.7% -2.4% 20.8% 44.9% 69.1% 93.2% 104.3%
C6 -100.0% -78.6% -35.0% -14.5% 6.8% 28.2% 49.6% 59.4%
C7 -100.0% -100.0% -71.7% -45.7% -18.5% 8.7% 35.9% 48.4%
C2 -48.1% -23.5% 1.7% 13.6% 25.9% 38.3% 50.6% 56.3%
C3 -51.0% -25.3% 1.0% 13.4% 26.3% 39.2% 52.1% 58.0%
C4 -61.0% -29.2% 3.2% 18.4% 34.3% 50.2% 66.0% 73.3%

The table shows that if Tenaga share price rises up to TA’s target price of RM13.23, punting who have bought C5 at present price of 34.5 sen would have a gain of 104% when settled at the expiry date on 29 August 2014.

KC Chong (17/12/2013)

Posted by houseofordos > 2013-12-18 07:51 | Report Abuse

KC, actually does the discount part really matter if we dont intend to keep the warrant till maturity ? If we bullish on share price direction, buying highest gearing would make the most money fastest... and we can enter and exit fast with good profit... furthermore, I notice that as expiry date approaches, the discount will always widen due to the uncertainty or manipulation by issuing bank.... I always treat these call warrants as very short term investments... not one that I would hold for months simply due its volatility....

Posted by captainrpes > 2013-12-18 08:29 | Report Abuse

KC, refer to your post about maybank call warrant...interesting explaination...i used to accumulating CY n CZ in my treasure box..since September. CZ gave me handsome return in end july early august when it shoot up 10.30~10.50...sold it with after T4..then now i bought back after it drop back to 10.00..in early september.
just want to ask your opnion...how was the maybank chart? Bullish or bearlish? Prices keep stagent at range 9.9++~10.00....will it going to push up further?
Hopefully maybank can goes up to 10.30-10.50...

Posted by kcchongnz > 2013-12-18 10:28 | Report Abuse

Posted by houseofordos > Dec 18, 2013 07:51 AM | Report Abuse
KC, actually does the discount part really matter if we dont intend to keep the warrant till maturity ? If we bullish on share price direction, buying highest gearing would make the most money fastest... and we can enter and exit fast with good profit... furthermore, I notice that as expiry date approaches, the discount will always widen due to the uncertainty or manipulation by issuing bank.... I always treat these call warrants as very short term investments... not one that I would hold for months simply due its volatility....

A premium of 10% means that the underlying share price must rise above 10% before you can make money on the warrants. Imagine if you have only 2 months left to expiry, what is the probability that the underlying share price can rise by 10%? If the premium is just say 1% and the warrant has 6 more months to expire, meaning that within this 6 months if the underlying share price just rises by 1%, you should make money. The chance is very high here.

Yes exactly, it is a game of probability. Engineers should be good at law of probability. The lower the premium, the higher the probability of making money. If the premium is high, the probability of making money is lower. The higher the gearing in this case does not make your chance to win higher, but just amplifies your losses if the underlying share price can't go high enough for you to make money. High gearing is only good if the underlying share price goes north.

The other very important factor in the theoretical value of warrant is volatility, how violent the movement of the underlying share price; the more volatile the better because there is more chance for you to make money.

In real punting of call warrants, the liquidity of the warrants is also very important.

No we don't have to hold the warrants to maturity. We normally sell before expiry. As far as the underlying share price is high enough to have positive settlement value, warrant price should track that closely.

Investment banks would not let the discount widen too much when settlement is approaching, because they would have to pay a lot when the underlying share price goes up further at settlement.

Yes, investment banks can and often manipulate the underlying share price when settlement approaches> But I think there is a limit they can do, especially if the underlying share is very liquid like Tenaga.

Posted by iWarrants > 2013-12-18 10:37 | Report Abuse

can you advise on instaco-wb kcchongnz? previously rhb gave tp of 0.5, although the the project is ongoing if you look at the financials. is this a good time to accumulate? Premium now is 70% gearing 2.21.

Posted by kcchongnz > 2013-12-18 10:57 | Report Abuse

Will Maybank share price "pushed" up? How the hell I know?

Posted by captainrpes > Dec 18, 2013 08:29 AM | Report Abuse
KC, refer to your post about maybank call warrant...interesting explaination...i used to accumulating CY n CZ in my treasure box..since September. CZ gave me handsome return in end july early august when it shoot up 10.30~10.50...sold it with after T4..then now i bought back after it drop back to 10.00..in early september.
just want to ask your opnion...how was the maybank chart? Bullish or bearlish? Prices keep stagent at range 9.9++~10.00....will it going to push up further?
Hopefully maybank can goes up to 10.30-10.50...

Captain, you got to consult a chartist on this. I ain't chartist. But if you look at the following link, Maybank target price by investment banks are quite high. At those prices, we will make a lot of money on the call warrants.

http://klse.i3investor.com/ptservlet.jsp?sa=pts&q=maybank

Posted by kcchongnz > 2013-12-18 11:19 | Report Abuse

Posted by iWarrants > Dec 18, 2013 10:37 AM | Report Abuse

can you advise on instaco-wb kcchongnz? previously rhb gave tp of 0.5, although the the project is ongoing if you look at the financials. is this a good time to accumulate? Premium now is 70% gearing 2.21.

The major shareholders issued to themselves huge amount of free warrants and they immediately dumped into the market at huge gain. At whose expense? The shareholders who believe in their spin and the naive followers who believe that they are so kind.

Anyway, at a premium of 70% when underlying share price is 26.5 sen and warrant at 12 sen, and also the high implied volatility of 60%, I do not think it is a good buy.

RHB gave a target price of 50 sen? So you know why now? If not you may not know you are the patsy.

Posted by iWarrants > 2013-12-18 20:40 | Report Abuse

thank you for your valuable insight on this company and about warrants, sifu, kcchongnz, can intro some 10-30cents warrants with generous upside potential? have very little fund to work with.

Posted by passerby > 2013-12-18 21:56 | Report Abuse

@ex-contractor, your heart still strong ? CMSB-CA & CC, look see look see for the entry....

they like to toy with the underlying

Posted by passerby > 2013-12-18 22:04 | Report Abuse

Puncak-CA....one and the only cheapest leverage alternative to Puncak-WB

gearing level approximately 4.1 times at today closing....

Posted by passerby > 2013-12-18 22:05 | Report Abuse

but watch out for the disposing activity by abang-adik OCBC/Great Eastern

Posted by passerby > 2013-12-18 22:07 | Report Abuse

Padini-CD, also one and the only leverage instrument for Padini

Posted by passerby > 2013-12-18 22:25 | Report Abuse

apart from the CWs...if you can notice the insiders movement at SDRED...

Posted by kcchongnz > 2013-12-19 14:59 | Report Abuse

Posted by passerby > Dec 18, 2013 09:56 PM | Report Abuse
@ex-contractor, your heart still strong ? CMSB-CA & CC, look see look see for the entry....
they like to toy with the underlying

Although the call warrants have some months to expire, and premium not too excessive too, the low gearing now at about 3 with CMSB at RM6.62 do not look attractive to me. Furthermore the profile of the warrants is not attractive when using option pricing of Black and Schole.

CW Price Ex-Price Ex-Ratio Expiry date Premium Gearing
CA 0.240 5.10 7.00 18/07/2014 2.4% 3.9
CB 0.375 4.50 6.00 30/09/2014 2.0% 2.9
CC 0.270 5.00 8.00 24/10/2014 8.2% 3.1

Posted by kcchongnz > 2013-12-19 15:47 | Report Abuse

Posted by passerby > Dec 18, 2013 10:04 PM | Report Abuse
Puncak-CA....one and the only cheapest leverage alternative to Puncak-WB

Puncak CA at 14 sen and a premium of 18% is not cheap. Although it has another year to expire, it is risky because of the takeover talk by the Selangor Government. When taken over, all the time value of CA is lost. Its intrinsic value is only 4 sen. Option pricing also shows it is way overvalued.

Puncak Wb is not attractive too as the gearing is only 1.3 times. Not worth.

gearing level approximately 4.1 times at today closing....
Warrant Price Ex-Price Ex-Ratio Expiry date Premium Gearing
CA 0.140 3.100 6 15/12/2014 18.0% 3.98
Wb 2.480 1.000 1 20/07/2018 4.2% 1.35

Posted by passerby > 2013-12-19 18:30 | Report Abuse

Posted by kcchongnz > Dec 19, 2013 02:59 PM | Report Abuse

Posted by passerby > Dec 18, 2013 09:56 PM | Report Abuse
@ex-contractor, your heart still strong ? CMSB-CA & CC, look see look see for the entry....
they like to toy with the underlying

Although the call warrants have some months to expire, and premium not too excessive too, the low gearing now at about 3 with CMSB at RM6.62 do not look attractive to me. Furthermore the profile of the warrants is not attractive when using option pricing of Black and Schole.

CW Price Ex-Price Ex-Ratio Expiry date Premium Gearing
CA 0.240 5.10 7.00 18/07/2014 2.4% 3.9
CB 0.375 4.50 6.00 30/09/2014 2.0% 2.9
CC 0.270 5.00 8.00 24/10/2014 8.2% 3.1

ya, low gearing but what other options do the punters have ?....they got non other than these 3 CWs available....if they were to ride on CMSB uptrend, they have to pick either CA or CC...else can just look see look see

Posted by passerby > 2013-12-19 18:45 | Report Abuse

Posted by kcchongnz > Dec 19, 2013 03:47 PM | Report Abuse

Posted by passerby > Dec 18, 2013 10:04 PM | Report Abuse
Puncak-CA....one and the only cheapest leverage alternative to Puncak-WB

Puncak CA at 14 sen and a premium of 18% is not cheap. Although it has another year to expire, it is risky because of the takeover talk by the Selangor Government. When taken over, all the time value of CA is lost. Its intrinsic value is only 4 sen. Option pricing also shows it is way overvalued.

Puncak Wb is not attractive too as the gearing is only 1.3 times. Not worth.

gearing level approximately 4.1 times at today closing....
Warrant Price Ex-Price Ex-Ratio Expiry date Premium Gearing
CA 0.140 3.100 6 15/12/2014 18.0% 3.98
Wb 2.480 1.000 1 20/07/2018 4.2% 1.35

please don't get me wrong when I say cheap....I'm referring to the cost per unit regardless the premium base, coz CA is the only CW issued so far, nothing to compare or select....it is either you want to leverage or not only

risky because takeover talk by Selangor Government? If it is taken over at higher price than RM 3.9, it should be ok....else kena makan sendiri

they only buy the water asset Puncak Niaga or buy over the whole company including their O&G arm ?

Posted by kcchongnz > 2013-12-19 19:05 | Report Abuse

If you buy Puncak CA at 14 sen now when the underlying share price is 3.34, you are paying 10 sen as time value as 4 sen is its intrinsic value (3.34-3.10)/6. So if Puncak is de-listed, you lose all the time value of 10 sen which is made up of 70% of its value.

If the company is taken over at the present price, you will probably lose all the 10 sen time value. If it is privatized at 3.90 (17% higher than present price)as suggested by you and if is concluded before the expiry of the call warrant, you will get settlement of 13.3 sen (3.90-3.10)/6. Noting to gain also.

so why take the risk punting this call warrant when the potential of gain is limited?

Posted by passerby > 2013-12-19 19:14 | Report Abuse

that RM 3.90 is my reference price for break even...i'm expecting them to offer more than that after reading a few different report from IBs

if really limited to RM 3.90 , i'll not be interested as well :)

Posted by kcchongnz > 2013-12-27 17:34 | Report Abuse

The power of leverage

When I wrote about punting the call warrants of Tenaga just 10 days ago, (See posting here on 17/12/13)Tenaga's share price was RM11.02. It has increased by 5% to RM11.60 at the close of today. Look how much the call warrants have increased in price as shown below.

CW Price now Price 17/12/13 Change
C5 0.51 0.345 48%
C6 0.21 0.195 8%
C7 0.15 0.115 26%
C2 0.79 0.79 0%
C3 1.24 0.97 28%
C4 0.84 0.63 33%

Tenaga 11.60 11.02 5%

Forget about C5 which closed at 51 sen for a 48% gain which I think it is not a normal transaction, and this price won't stay when market opens next week.

C3, C4 and C7 have gone up by 28%, 33%, and 26% respectively. How nice is it to make a return of about 30% in just 10 days.

Posted by kcchongnz > 2014-01-06 18:32 | Report Abuse

There are a lot of punters in KLSE. I like to punt too, seriously. But I focus on punting on call warrants.

Take for example, the WCT call warrant CM.

CM has an exercise price of 2.55 with an exercise ratio of 2. It expires in 31/7/2014, a long time to go. At the close of 2.14 of WCT yesterday, CM, at 3 sen is trading at a premium of 22%. The premium is a little high but CM has a very good profile for punting. It has a high gamma and hence when the volatility of WCT goes up, delta or the rate of change of the warrant in relation to the underlying goes up very fast. CW has a very high gearing of 35 times too.

At the close today, WCT share price went up to 2.23, for 9 sen gain, or 4%. WCT CM went up to 4 sen, of for a 33% gain. The 4 sen closing price may be illusive as it was most likely pushed up by insider to make it so, but I think CM should be able to sell at 3.5 sen, or a half sen gain. That would be 17% gain too.

Punting call warrant is a probability game. At least for a game of probability, one knows where he stands, rather than just purely based on luck.

Posted by nightshade > 2014-01-07 09:46 | Report Abuse

MKH-WB...very scarce.....

Posted by Jvei > 2014-01-07 11:02 | Report Abuse

Dear Mr.KCChongnz, electricity has increased, would you mind to take a look on YTL power WB?

Posted by nightshade > 2014-01-07 11:06 | Report Abuse

I thought IPP contract with TNB have been fixed? tariff review got nothing to do with IPP