Use some of the profit from stocks to buy WARRANTS

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660ky612
Posts: 245
Joined: Thu Jun 14, 2007 11:32 am
Location: Hong Kong SAR

Use some of the profit from stocks to buy WARRANTS

Post by 660ky612 »

Options usage - an example
From p.233 of "Winning the loser's game: timeless strategies for successful investing / Charles D. Ellis, 2002"
My Aunt Saizie is in her late eighties. After years and years of careful saving and wise investing, she built up a portfolio of common stocks worth nearly $100,000. She asked me whether she should take the strong recommendation of a very nice-looking young man from the local broker's office. His proposition didn't sound quite right to her: sell all her stocks (incurring a large capital gain) and put most of the money in Treasury bills for safety of principal and then use the rest to buy stock options so that she could participate in any bull market that might come along. Fortunately, she is too wise and shrewd an investor to get drawn in by something that "interesting" (Imagine all the commissions that would have been generated for the broker)

Comments?


Warrants usage - an example
There are many Warrants Providers actively participating at the Hong Kong stock market nowadays. Nearly all of them are coming from abroad, such as Societe Generale, BNP Paribas, Credit Lyonnis, Credit Arigole, Deutsche Bank, ABN Amro, Credit Swiss, UBS, HSBC, KBC of Belgium, Merrill Lynch, Morgan Stanley, JP Morgan Chase, Citigroup, Goldman Sachs, and Macquarie. (One reason is their superior intelligence as I believe maintaining warrants should not be a trivial task. It must be of high-tech and there may be hackers, . . . etc.)

Here is one thing that these Warrants Merchants TEACH us everyday via the media such as radio: "Use some of the profit obtained from stocks to buy warrants." Compare with the above example from "Winning the loser's game."

Comments?

660ky612 Hong Kong

PS. Feel embarrass because of conflict of interest? Those who sell warrants here are mainly young girls. Very pretty and with sweet voice. Yet, could not touch, but I might actually do this as there are many many seminars that we may meet together face to face.
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zhiwiller
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Post by zhiwiller »

Warrants are leveraged, and often their terms are much more beneficial to those offering them. The best case scenario for you is that the company calls them, limiting your upside. But they can expire worthless, just like an option. In the one case where I speculated in warrants back in my pre-Diehard days, the info about the terms of the holding was incredibly hard to get a hold of.

There's a reason pretty young girls are selling them and it is the same reason as your options example above. They don't want you to think about what you are buying, they just want you to buy. Distraction. Smoke and mirrors. These aren't a good idea. These are products to be sold, not bought.
unclemick
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Post by unclemick »

1974 - I don't remember any sweet young girls selling - I managed to be dumb enough to buy them all by myself - after I read a book or something silly like that.

Another of my misadventures on the highway of life - which helped prepare me to buy 500Index in 1977 when it came availible in my 401k.

heh heh heh heh - I haven't bought any commoditites yet in my career - CCF's give me a twinge - but Target Retirement for retirement and a few stocks for lagniappe.

Hmmm - memory?? - threw in the towel by 1978 - pretty much a wash!
alexander
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Joined: Sun Jun 10, 2007 8:32 pm

Post by alexander »

If warrants were SO AMAZINGLY PROFITABLE, why would all of these companies go through the bother of paying those nice young girls to convince you to buy them? Wouldn't they be better off holding the warrants themselves?
grok87
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Joined: Tue Feb 27, 2007 9:00 pm

Nope

Post by grok87 »

No buying options or warrants is not a good idea.

Buying calls is bad because it is speculating not investing. By definition options are short term in nature, as opposed to investing for the long term.
Also their are two sides to every option trade (you buy, someone sells it too you). When the option expires there will be a winner and a loser. We are amateurs, the sellers are professionals- who do you think the loser is going to be?

Buying puts is viewed by some as a form of insurance. But you don't live in your stocks (like you live in your house) so you don't need to buy insurance for them. Also same point as above applies with regard to winners and losers.

Just say no!

:-)

cheers
grok
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hollowcave2
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Hong Kong

Post by hollowcave2 »

I'm not exactly sure what you're asking. Are you considering some of these strategies?

I am not familiar with warrants; it's my understanding that a company issues a limited number of these to some privileged people. Similar to options, but I like options better because they are more transparent and public.

I've heard of the strategy outlined in your first paragraph. One name for it is the 90/10 strategy. Ninety percent of the money is put into T-notes, say 2 years, and ten percent into 2 year LEAPS covering the stock market. Over the 2 years, you limit your downside risk to less than 10 percent but can participate in a bull rally with the options. The idea is that since the markets go up in the long run, you'll win more than you lose. It's an intriguing idea, but I don't like it enough to do this with all of my money.

In any case, I would not do anything a salesperson or a seminar told me.

Steve
Topic Author
660ky612
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Re: Hong Kong

Post by 660ky612 »

[No 1 globally] Come to play WARRANTS at Hong Kong http://diehards.org/forum/viewtopic.php?t=6944


They are far more superior that you might have thought.

660ky612 from Hong Kong
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