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DO NOT BUY WARRANTS/WAVES GOING INTO THE WEEKEND

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CrownA
Super Contributor
I just saw someone buy into TOPSBZ. You going to lose more than a week time decay, and because it is 33c, the spread next week will be 30/31 without you blinking - 10% down !!
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11 REPLIES 11
CrownA
Super Contributor
And the issuer knocks off a cent or two for good measure! Even SBK
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SimonPB
Valued Contributor
opsbz, weekly time decay = 4.4% = less then a cent per week, so betwen now and friday will only loss a fraction .
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asylum
Super Contributor
Hi Simon what benefits do warrants have over SSF?
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CrownA
Super Contributor
Thanks Simon - just my experience the maths does not add up.Let us see on Monday am, 9.10 sharp please!
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Tango
Super Contributor
I'm jumping in here - not many benefits at all. With warrants, you can't lose more than 100% of your initial investment. Still not a great outcome, and one easily avoided with stops.
Do a comparison between SSFs, CFDs, Warrants, and Waves, and look at the trading costs, spread, liquidity and gearing. Warrants are the worst trading instruments of the bunch, which is why the banks love them.
The only warrants worth buying are far out-the-money puts on the eve of a crash. But then your timing needs to be perfect.
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Not applicable
Nice you see you still around Tango.
When I first started trading on here I was heavily into warrants, and then did a bit of research into other geared products and found SSF's. I struggled for quite a while to understand why warrants even existed in the face of SSF's. I mean, SURELY the more experienced trader quickly realises the many advantages SSF's have over warrants.Warrants should have died a natural death a long time ago in the global picture.
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Not applicable
ooops - got cutoff there . . here's the rest >>>
However, and somebody will have to correct me if I'm wrong please, I think it's only in SA that warrants are issued exclusively by bankers. As far as I know, in many other countries an individual can write warrants (options) on almost anything. I'm not entirely sure how it works in detail but it certainly seems that some very clever characters cornered the market in SA before anybody else knew what was happening. Of course, as has been mentioned already, the warrant ISSUER is normally the guy who makes all the money. NOT the trader.
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Tango
Super Contributor
hi.. barely here ; ) I pop in every week or so and take a scan. Warrants/options can be used as sophisticated and effective trading instruments, but as you point out, only when the ability to write options and to short calls or puts is possible. I don't understand why anyone trades them in SA, except to hedge a position in the market (which a SSF could be used for too) or as I said earlier, to go heavily short before a crash using out-the-money puts, where the gearing can be phenomenal. Take a look at what the BSC options were going for last week....
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Tango
Super Contributor
ok here's a nice illustration of using near-dated, out-the-money puts -
http://www.thestreet.com/newsanalysis/optionsfutures/10407812.html
The warrants went from 15c to $9.40 on Friday
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SimonPB
Valued Contributor
AvS, you can write your own options (warrants) in SA, but as counter party risk is then very real it is not easy for the private client. Globally private clients trade warrants rather then write their own options. Albeit different countries prefer differnt derivatives. Germany/italy/sweden is warrants, Aus, istalments, UK spreads, India, SSF's.
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Not applicable
Best is CFD's. No Greeks, no market maker *****. Problem in SA is offered by small players. Got scared by Global trader. Now trading with Ideal, a pty. We need big banks to offer cfd's.
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