Fishing story, page-11

re: Fishing story ... debono Hi debono ... Hmmm... not quite ...

BSOPM modeling not related to whether a derivative is 'in the money' at any point or not ... or where a price 'will hit' as the underlying price is the same for every warrant offering ... the theorum simply formulates the value of the derivative given certain inputs ...

BSOPM modeling does reveal that the optimum yields are 2-3 clicks OTM ... etc ... etc ... hence the 'rule of thumb' ...

WPLWSH will outperform WPLWAE at any price point or date ... simply because the higher Strike according to BSOPM modeling favours this warrant over the other ...

Further, WPLWAE will yield higher than a warrant with say $13.00 or $13.50 Strike ... unfortunately there is no comparative warrant at these Strikes otherwise I could project the yield to 30/05/02 and demonstrate the higher yield potential of WPLWAE ...

Accordingly, there would be traders whose trading strategy favours a longer term warrant ... and would look at say a 25/07/02 Expiry ... exiting say 30/06/02.

BSOPM modeling would reveal similiar sensitivity analysis with projections at various Strike prices ... again the most profitable about ... guess where .. ??

On MM's and FAIR VALUE ... where liquidity is low MM's manipulate the Buy/Sell to favour and preserve the Premium income of the Issuer ... often means UNFAIR VALUE and criticisms abound in the market place ... where liquidity increases due to BUYERS coming into the warrant offering, ONLY then does the true market rate (FAIR VALUE) apply as the MM's take a back seat ...

New chums should check those Warrants having higher Volumes traded for these reasons ...

I often look for arbitrage opportunities as sometimes it is possible to beat the MM's at their own game ... nice when it happens..

Cheers ...


This is only my view ... read the red stuff.