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Gold Stocks Warrants, Options and LEAPS – It’s All About Leverage

Companies / Options & Warrants Aug 03, 2010 - 08:03 AM GMT

By: Dudley_Baker

Companies

Investors looking for a more interesting and potentially rewarding approach to investing in the natural resource shares should investigate the use of warrants, options and LEAPS.

The use of all three or any of these investment vehicles positions the investor to maximize their gains in the natural resource sector in the coming months.


We are of the opinion the markets will experience a great upsurge soon and the shares of the natural resource companies should perform very well. Of course those savvy investors knowledgeable of warrants, options and LEAPS will do much better so we want to introduce you to each.

Options
We like to start our discussion with options, namely call options, which are trading on the natural resource shares. Many of you are familiar with call options and basically, a call option allows the holder to purchase the underlying stock at a specific price and expiring on a specific date in the future.

Call options can have a life of 30 days and up to 1 year before expiration. You must be right as to your timing and to the underlying company. If you are correct you can magnify your gains and at worst you risk your capital, therefore, you manage risk by the amount you invest.

LEAPS
LEAPS are like options except that they may have longer terms. The maximum time now on LEAPS is January 2012 giving you approximately 18 months to be right in the direction of the markets and your choice of companies. LEAPS, like options are traded on the Chicago Board Option Exchange, www.cboe.com.

Warrants
Warrants are very similar in definition to a call option but with a few unique features. By definition a warrant is a security giving the holder the right but not the obligation to acquire the underlying security at a specific price and expiring on a specific date in the future. But a warrant trades like a security with its own symbol and is purchased through your brokerage account.

Warrants are actually issued by companies usually in connection with a financial arrangement, public offering or a private placement. In the resource sector it is extremely common for warrants to be issued in private placements and sometimes, after the required four month hold, the warrants will be allowed by the company to trade.

Frequently warrants are issued with a minimum of two years and some have been issued with five or more years of life. You can see the big difference is the time factor when considering options, LEAPS and warrants but some times your favorite company may have not warrants trading and then you should explore whether the company has options or LEAPS available.

Our Market View:
We are of the opinion the natural resource shares will begin a major rise very soon and we encourage investors to get their shopping done as soon as possible. Yes, there is a chance we could be early, but we strongly suggest you get started buying now.

We like to show as a proxy for our views a chart of the Venture Exchange Index relative to gold. Below you can see that very recently the CDNX, Venture Exchange, is out performing gold. The Venture Exchange is where many of the small natural resource shares are traded and we believe it is ready to explode higher at any time.

The question for each of you is:
1. Are you already in the game? If so, great, just be patient.
2. If not, are you preparing to enter ‘the game’ and buy a basket of these undervalued junior
    mining or energy shares or the long-term warrants or LEAPS  trading on them?
3. Are you going to wait until prices rise substantially and start to peak before entering ‘the
    game’?

Yes, most investors will wait and wait and wait and then buy near the top and then complain that they couldn’t make any money and they will blame the markets, the penny stocks and everyone in the business before taking responsibility for their own poor judgment and timing.

We are being given the rare possibility of a once-in-a-lifetime-opportunity, what will you do with it?

For those readers unfamiliar with our services:

  • PreciousMetalsWarrants.com provides an online database for all warrants trading on the natural resource companies in the United States and Canada.
  • InsidersInsights.com tracks the buying and selling of corporate insiders with a focus on the junior mining and natural resource sectors. Buy and Sell Alerts are issued as deemed relevant based upon our analysis.

We encourage all readers to sign up for our free weekly email.

Dudley Pierce Baker
Guadalajara/Ajijic, Mexico
Email: support@preciousmetalswarrants.com
Website: PreciousMetalsWarrants
Website: InsidersInsights

Dudley Pierce Baker is the owner and editor of Precious Metals Warrants and Insiders Insights. Articles are written by Dudley Baker along with contributing editors, Arnold Bock of Mendoza, Argentina and Lorimer Wilson of Toronto, Canada. PreciousMetalsWarrants provides an online subscription database for all warrants trading on junior mining and natural resource companies in the United States and Canada and a free weekly newsletter. InsidersInsights alerts subscribers when corporate insiders of a limited number of junior mining and natural resource companies are buying and selling.

Disclaimer/Disclosure Statement:PreciousMetalsWarrants.com is not an investment advisor and any reference to specific securities does not constitute a recommendation thereof. The opinions expressed herein are the express personal opinions of Dudley Baker. Neither the information, nor the opinions expressed should be construed as a solicitation to buy any securities mentioned in this Service. Examples given are only intended to make investors aware of the potential rewards of investing in Warrants. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions involving stocks or Warrants.

Dudley Pierce Baker Archive

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