you see, this is where I think a lot of okes are grappling with the principle of risk vs reward. Will we see a downturn - don't see any reason why not. The issue is, how much am I prepared to risk to find out. Lets say yesterday's highs - oh no wait, BB is already in, at yesterday's highs. So he has taken an estimated amount higher than yesterday's highs as acceptable risk. Now the market, as usual, is giving him a 50/50 chance. So he is expecting the market to at least move twice the risk he was prepared to take. If he is not working off these odds, then he is going to lose over the long term. Now the question is, how much can we expect the market to move down in a bull run? If you are day trading, you might have a chance to beat those odds, but like I said before, YOU CANT DAY TRADE WITH WARRANTS!!!
Not sure where I read it but very interesting lesson I thought. If a market goes red and drops from 100 points to 50 and you called it right you make 50%. However if you go long in a black market at 50 points and exit at 100 you make 100%. So ultimately it would look like the bull model works best if you use it right. Investor A will exist his position at 100 points and wait to re-enter at 50 points thus taking his profit of say R1000 and buy double the investments at 50 points and doubling his funds when it gets to 100 points (thus R2000). Investor B might ride out the storm and let his money (R1000) depreciate by 50% (R500) and maybe buy another R500 worth (thus at same exposure as investor A) at 50 points and wait for the market to recover to 100 points to get out with R1500. now a trader should be working both directions, with the inherent risk, and in all likelyhood come out just slightly better than the investor A of about R3000. Trader took R1000 invested in the down turn and made 50% (R500) and invested that same R1500 (R1000 plus R500 profit) at 50 points and existed at 100 points.
you do occassionally get arbitrage opportunities with warrants, when the warrants desk is too slow to update the spread, I have made money like this once or twice, but I don't have a system for trading this. However, I re-iterate shanil, you might have made money yesterday, but try keep that up over the long term? Your warrant spread chews up 50% of the average daily transaction range straight away, so you have to move a full daily transaction range to break even, if you assume a 50/50 win loss ratio. You will want to be hitting a big 2*normal transaction range day to beat the odds using warrants intraday