TOPI Warrants

[earlyret]

If I buy for example 100000 TOPSBM Warrants, with a strike of 26000 and a conversion ratio of 5000, and I would like to exercise my right to buy the underlying after it reaches say 27000, what do I get to buy? 20 TOPI's ??

[SimonPB]

you can only exercise them for cash .. an if you do so before expirey you loose out as you give away time value ..

[#3]

Good question. What are you getting?

[SimonPB]

well the underlying is the ALSI futures .. but on Topi warrants they only exercise for cash, not the ALSI ..

[earlyret]

How much? Exercise price 26000, conv. ratio 5000, and say the Top40 is sitting at 27000 points. and I got 100000

[SimonPB]

27k-26k = 1k times R1 a point = R1k divided by cover of 5000 = 20c ..

[earlyret]

thanx...

[#8]

What happens when the price is under the strike price? Do you lose it all?

[SimonPB]

at expirey, yes ..

[#10]

So basically the only difference between a knockout warrant and a normal out-of-the-money warrant is that the one will give you a bit of time to possibly recover where the knockout kicks your butt immediately. Correct?

[SimonPB]

yes, but you should never be waiting for a warrant to recovery .. they are for trading and time decay will get you in the end ..

[#12]

Can we explore the time-decay a little bit? If I buy a warrant for 50c, 3 months before expiery, and it goes up to 60c one month later, would the time decay chew up my 10c profit because 30 days have passed? Will the interest chew up my 10c profit?

[SimonPB]

I got to run, so here's a quick answer ..
in short maybe not as per what you wrote above .. maybe maybe, depends on lots .. we give time decay as a percentage per week you'll loose .. strike below spot the entire price is subject to time decay, strike above spot means you have some intrinsic value which is not subject to time decay .. also importantly time decay is more servere in the last life of a warrant ..

[#14]

Okay thanks for that, but I must be missing something so here is another question. Is it only expiery of a warrant that can wipe out my capital? If I purchase a warrant 150 days before expiery and it goes down big time, as you stated I will lose value because of time decay and the warrant being in the red. But then what happens when the warrant goes into the green after 30 days. Simon can you please explain this via this example: I buy TOPSBM today at 20c Capital: R10 000 Days to expire: 140 Weekly Time decay:3.40% Let's first assume that it goes down by end of today to 10c and stays down for 30 days. How much of my capital have turned into thin air in 30 days from now if I should sell at 10c in 30 days time?