Many of the HK-CWs closed at a discount last Friday as traders and investors disposed of their shares; partly because many do not want to hold any positions over the weekend and also force-selling activities. The Dow Jones industrial index closed slightly lower last Friday at 13,895.63 (-17.31 points). Traders can watch out for the CWs with huge discount, such as CHMOBIL-C1 (1.83% discount), CNOOC-C1 (2.08% discount), & ICBC-C3 (1.87% discount). Nevertheless, do stay cautious as many of the underlying stocks have already risen quite a lot.Sunday, September 30, 2007
List of HK call warrants
Many of the HK-CWs closed at a discount last Friday as traders and investors disposed of their shares; partly because many do not want to hold any positions over the weekend and also force-selling activities. The Dow Jones industrial index closed slightly lower last Friday at 13,895.63 (-17.31 points). Traders can watch out for the CWs with huge discount, such as CHMOBIL-C1 (1.83% discount), CNOOC-C1 (2.08% discount), & ICBC-C3 (1.87% discount). Nevertheless, do stay cautious as many of the underlying stocks have already risen quite a lot.
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5 comments:
hi dragon,
the current discount peg to the warrant at current price may eventually disappear if the underlying drops further, thus making the warrant "out of money". Thus, the term premium or discount factor may be an important one, but not so vital anyway.
Unless the expiry is nearing to an end, and there present some discount, traders can buy and get the different.
Am I right? Please correct me if I am wrong as I am new to warrant. Thanks
Good day sops,
The premium/discount factor may not be that important for those who intend to hold the cws for a longer period of time because all you need to do is set a target price for the underlying share and then calculate (backwards) to determine the expected price of its call warrant. Even if there is a premium at present, it will quickly disappear when the price of the underlying share rises substantially.
Traders would go after call warrants which are at discount or having low premium. If the market is bullish, most call warrants will be trading at a premium as people are expected the underlying share price to rise further.
On the other hand, if the market is going on a down-trend, most call warrants may be at a discount as traders & investors expect the underlying share price to drop further. Nevertheless, I know we are all very bullish on the Hong Kong market now; therefore just grab the HK call warrants if you feel the price is low enough.
Hi Dragon,
Not today anymore. My fav. petrochina and BOC have overshot the roof.
Anyway, thank you for the explanation.
CheerS~
Dragon again,
"Even if there is a premium at present, it will quickly disappear when the price of the underlying share rises substantially."
Can't the premium build up as the underlying rise quickly? As in the status quo remains or accelerate?
Tks
Hi again,
Actually, market marker do at times and often use premium to squeeze warrant traders. They tend to adjust downward on the bid/ask.
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