Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
USDT Ponzi Scheme FINAL WARNING To EXIT Before Tether Collapses Crypto Exchange Markets - 22nd Jun 21
Stock Market Correction Starting - 22nd Jun 21
This Green SuperFuel Could Change Everything For the $14 Trillion Shipping Industry - 22nd Jun 21
Virgin Media Fibre Broadband Installation - What to Expect, Quality of Wiring, Service etc. - 21st Jun 21
Feel the Inflationary Heartbeat - 21st Jun 21
The Green Superfuel That Could Disrupt Global Energy Markers - 21st Jun 21
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Understanding Warrants

InvestorEducation / Options & Warrants Nov 14, 2007 - 10:24 AM GMT

By: Dudley_Baker

InvestorEducation Did you know that warrants have been in existence for many decades but very few investors know about them? Why? Unfortunately, very few of the professional newsletter writers and analysts understand them so they do not write about them. Are warrants that difficult to understand? Of course not; it's just that one needs to take some time to learn and understand this incredible investment vehicle.


Have you ever participated in a private placement of shares in your favorite mining company? If you, so probably received some warrants in this private placement and a good chance you did not even understand what you received.

To put this discussion in perspective, I would like to offer a quote from the past,

"...Common stock warrants turn in the most spectacular performance of any group of securities....the speculative potentialities of common stock warrants are enormous....

With potential profits and potential losses so great it is a source of wonder that so little understanding of the nature of common stock warrants exists not only among the investing 'public', who might be forgiven this sin, but even among the many 'professionals' of the business upon whom the 'public' depends for information and guidance."

      By Sidney Fried, 'The Speculative Merits of Common Stock Warrants', 1949.

Did you get that? 1949. As we stated in the above opening paragraph, the public and professionals of today are, for the most part, not aware of the enormous profit potential of warrants and thus absolutely nothing has changed since Sidney Fried's comments in 1949. 

In the 1960's and 1970's Sidney Fried had a service called, ‘The RHM Warrant Survey' to which many investors subscribed and which was available only in hard copy. To the best of our knowledge, this service stopped in the late ‘70's or early 80's and very little information has been available since to investors, until recently.

So let us give you a brief introduction to warrants.

A warrant is a security (like an option) giving the holder the right, but not the obligation, to purchase the underlying stock at a specific price, within a specified time period. Sounds very much like a call option or LEAP, doesn't it? Very much so.

Actually warrants are issued by a company usually in connection with a private placement or a financing arrangement and many of the warrants issued will remain privately held and will never trade in the open marketplace.

Fortunately, there are many warrants that trade on the Toronto Exchange and a few in the United States on the NYSE and the AMEX and many others are traded in the U.S. OTC market with assigned symbols. As an individual investor, your objective, in our opinion, should be to trade the warrant, without an intention to exercise the warrant.

Currently there are many warrants trading with expiration dates out to the year 2012 (one out to 2017) and though warrants expiring within, say, 2 years, may possess great upside leverage and potential for gains, they also pose a greater risk. Therefore, we personally suggest that investors focus their attention on those warrants which have a remaining life of at least 2 years before the expiration.

So, why the interest in warrants? The owner of the warrant receives none of the benefits of ownership of the common stock of a company.  He cannot vote, and he does not receive any cash dividends.  Therefore, why would an investor want to buy an option (warrant) to buy something instead of buying the thing itself?

The essence of the answer is that the anticipated gain on the warrant must be greater than the anticipated gain on the common stock.  Leverage, or at least potential leverage, is the prime reason an investor would be interested in warrants. This more rapid growth in the value of the warrant relative to the common stock is called leverage. Without this possibly of such leverage the investor would buy the common stock.

As with any investment you must decide how much of your portfolio to allocate to different sectors, different shares, ETF's, mutual funds, gold bullion, etc. 

Even though we personally view ‘long-term warrants' as investments (as opposed to speculation), we find an allocation of 10% to 20% maximum of your portfolio as a reasonable allocation of your total dollars to this investment vehicle.

To summarize, an investor may wish to purchase a warrant which is the option (the right) to purchase the common stock of a company.  He may prefer to purchase the warrant instead of the common stock because the warrant offers more potential gain, that is, the warrant offers the investor leverage. Using a portfolio allocation of 10% - 20% and buying long-term warrants on some of your favorite mining shares, you are now in the position to capture some incredible potential gains in this bull market in the natural resource and commodity sector.

For those investors seeking more knowledge on warrants we invite you to visit our Learning Center at Precious Metals Warrants. We provide you much more information and examples to enhance your learning experience.

You may also signup for our free weekly email, The Warrant Report .

And for those readers in the San Francisco area, we will be providing a master workshop at the Hard Assets Investment Conference (November 18 th & 19 th ). Our workshop is on the 19 th at 7:30 – 8:00am . Please check the conference schedule for more details .

Dudley Pierce Baker
Guadalajara/Ajijic, México
Email: info@preciousmetalswarrants.com
Website: PreciousMetalsWarrants

Dudley Baker is the owner/editor of Precious Metals Warrants, a market data service which provides you with the details on all mining & energy companies with warrants trading on the U. S. and Canadian Exchanges. As new warrants are listed for trading we alert you via an e-mail blast. You are provided with links to the companies' websites, links to quotes and charts, tips for placing orders and much, much more. We do not make any specific recommendations in our service. We do the work for you and provide you with the knowledge, trading tips and the confidence in placing your orders.

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

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in