Category: Money Tips Date: 2006-12-12
The last issue discussed in this column the short-term market performance card there is a big uncertainty, the bid-ask spread will lead to the C of E does not seem close to being stock rise or fall, in fact, implied volatility of the issuer has remained stable and out of the orders are follow the beat is stocks only in the middle of buying and selling of price changes, which are essentially driven by the market, so the performance warrants will be very erratic.
In many cases, an active trading market for some short-term certificate, if the issuer does not look at the real location of orders, we could easily be mistaken warrant bid-ask spread is not large, so they buy at ease. The need to put goods in time, warrant trading has become dull, or even has no other market participants are willing to accept the goods, the larger bid-ask spread will emerge. Finally, they soon discovered they had a very high price to buy the warrants, now only dream of other people willing to take the high price of goods, or bear the pain stop-loss order to sell back to the issuer at a reasonable price.
Therefore, if we can be done its homework before they enter the market, for example, through a number of favorable market conditions, the first observation of the issuer's orders, where, or the first broker or directly to the warrant issuers queries can avoid these misunderstandings can from the bid-ask spread the cost of long budget. Permit investors to buy short-term, the majority is based on the following two reasons:
First, the greed of their premium is low, such as the warrant was posted price or prices in the short-term certificates (except for prices outside the card), usually a premium is also lower than the long period of warrants. Some investors are optimistic about short-term performance shares and plans to buy a warrant and hold to maturity, the premium has become one of the considerations, the sale price difference but not a problem, because they do not intend to open positions. However, a low premium does not mean less loss of time value, if no intention to hold to maturity, the premium of the reference value will not be high.
Second, the corruption of its high leverage. The actual short-term permit high leverage, unless they are deeply in-the-card. If you think there are stocks that will shortly be an explosive rally, buying more short-term warrants to win the high returns are also beyond reproach. If stocks are really sharp, short-term certificate of return can be very considerable loss of time value and the bid-ask spread, and so the cost will become insignificant.
