Using Options & Warrants
in Volatile Markets
written Aug 18, 2011
posted Aug 20, 2011
Gold is roaring once again this morning and trading above $1800
an ounce and silver is back over $40 an oz. Financial
markets are looking at another hard down day, and resource shares,
we will have to see what the day brings. Everyone knows the resource
shares have greatly lagged the performance of gold but our days
will come and the resource shares will play catch up and
this could begin at any time.
In these volatile markets, investors should be aware of some
of the advantages of using options, but even more so, long-term
warrants in their investment planning. With the markets up one
day down the next and the future somewhat uncertain perhaps a
slightly different approach might be necessary.
The use of options, warrants and even LEAPS would greatly limit
your initial cash outlay of your investment dollars. Thus,
you can control a share position in a company with much less
money but still process the potential for great gains.
This is what we would call a "win-win situation."
A call option gives the holder the right but not the obligation
to buy the underlying common shares at a specific price and expiring
on a specific date. Options will have a predetermined life of
no more than 12 months and would normally be traded on the Chicago
Board Option Exchange (CBOE).
A LEAP has the same definition but could start out with
a predetermined life of up to 2 years and again would trade on
Warrants, while somewhat similar, have some different
features. Warrants are issued by the company (not written by
an investor) in connection with a stock offering or financial
arrangement and can have a life of even 5 years or more.
The basic definition is the same, being, a warrant gives the
holder the right, but not the obligation, to acquire the underlying
security at a specific price and expiring on a specific date
in the future. The length of the warrant, whether 2 years, 3
years, 5 years, etc. is determined by the company and is part
of the negotiating process in the issuance of the common shares
along with the predetermined exercise price.
Investors should be especially intrigued with those companies
that have long-term warrants trading with a remaining life of
over 2 years. The more time the better to give the company time
to execute on their business plan and time for the markets to
Think about it. A warrant -- a long term call if you will,
on a company that you like -- greatly limits your cash
outlay while offering you the potential for great gains. The
leverage is the key to warrants, a greater gain on your investment
If you need more information you can visit our Learning
I saw this interesting quote recently:
"...if we are all in the parade
who is going to watch us walk by."
Think about this the next time you try
and convince a friend or family member to invest in resource
shares or warrants. Most just don't get it, at least, not yet.
"Get yourself positioned to take
advantage of this once in a lifetime ride."
For those readers unfamiliar with our
- An online database for all warrants
trading on the natural resource companies in the United States
and Canada. Our database is the most comprehensive database that
you will find.
- "A Look Over My Shoulder"
This is my entire personal portfolio and I provide an audio update
each Thursday evening... and emails, as I buy or sell securities
or warrants. Each subscriber can decide whether to follow me
but this is your decision and I suggest that subscribers do their
own due diligence before buying any securities.
- Insiders Trading Data: We track the
insider trading on the Canadian Securities and issue BUY and
SELL Alerts as we deem necessary.
Readers are encouraged to sign
up for our free weekly
August 18, 2011
is the owner and editor of Precious Metals Warrants. PreciousMetalsWarrants
provides an online subscription database for all warrants trading
on junior mining and natural resource companies in the United
States and Canada and a free weekly newsletter. Jeff Baker has
recently joined us and will be providing editorial comment and
marketing assistance to our services.
PreciousMetalsWarrants.com is not an investment advisor
and any reference to specific securities does not constitute a
recommendation thereof. The opinions expressed herein are the
express personal opinions of Dudley Baker. Neither the information,
nor the opinions expressed should be construed as a solicitation
to buy any securities mentioned in this Service. Examples given
are only intended to make investors aware of the potential rewards
of investing in warrants. Investors are recommended to obtain
the advice of a qualified investment advisor before entering into
any transactions involving stocks or warrants.
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