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Precious Metals Companies And Stock Warrants

December 25, 2019
By Dudley Pierce Baker
Founder - Editor
Common Stock Warrants
Junior Mining News

Happy Holidays To All and perhaps an idea for you heading into 2020.

There are many stock warrants trading on companies in the Precious Metals sector.

Perhaps you remember the name Precious Metals Warrants which we founded in 2005?

That was a great name at the time as resource companies and stock warrants on those companies did well, very well.

That time is here again as I anticipate soon, that gold, silver and mining shares and of course the warrants trading on those shares to rise substantially creating many 500% and 1,000% gains, perhaps much more.

In 2013 we changed our name to Common Stock Warrants as expanded our stock warrant database service to include all warrants trading in the United States and Canada and in all industries and sectors.

Many of my subscribers are primarily interested in the resource sector and currently there are many warrants trading on companies in the gold, silver, oil & gas and uranium space. Some are begging to be bought at current prices.

Subscribers to our Gold or Lifetime Subscriptions have much more information at their disposal, with access to my weekly audio and to my personal portfolio, “A Look Over My Shoulder”.

I follow the views and technical analysis of Chris Vermeulen at The Technical Traders and suggest you also visit their website and consider a subscription.

Stock & ETF Trading SignalsI look for 2020 to be a banner year for the resource sector with perhaps many 5 and 10 baggers, i.e., 500% - 1,000% gainers.

GET STARTED NOW!

Stock & ETF Trading Signals

Investor Interest Is Soaring For These Securities

Investor Interest Is Soaring For These Securities

 

Better than options, better than shares, better than preferred shares and better than convertible debentures.

Some others in the business have referred to these securities as Premium Shares, however, there is no such thing as Premium Shares which was a ‘made-up’ term by others for marketing to their base.

These securities are actually stock warrants which have been around since the 1920s.

Stock warrants are a favorite of many large and savvy investors, like Warren Buffett and Rick Rule, both of which would never participate in a financing unless warrants are issued to them as well as the common shares of the company.

For investors, ‘timing’ is extremely important, when to buy, when to sell. It is like a merry-go-round and each investor is in control as to when to enter or exit a trade. With stock warrants I usually like to have at least 2 years of remaining life before buying the warrants and there are many in my databases.

So warrants can be viewed as an equity kicker, incentive, to get the deal done and Warren and Rick are tough negotiators and want the best terms possible.

Admittedly, most of the warrants which Warren Buffett and Rick Rule receive are in connection with private placements which might not be available to the average investor, but there are many stock warrants trading which can be bought on the exchanges just like buying common shares but only if you know where to go and what to do.

In the United States, stock warrants trade on the NYSE, NASDAQ, AMEX and the Over the Counter Market (pink sheets). In Canada, the stock warrants trade on the (TSX) Toronto Stock Exchange, (TSXV) Toronto Venture Exchange, (CSE) Canadian Stock Exchange and the (NEO) NEO Exchange.

Our website //  http://CommonStockWarrants.com provides investors several different levels of subscription, all of which give you access to our ‘one of a kind’ database of stock warrants as well as possible access to Dudley's portfolio and weekly audio.

Numerous investment professionals are subscribers to these services including E.B. Tucker of Casey Research.

E.B’s Comments:
E.B. Tucker with Casey Research, recently referred to Dudley as 'the top expert in the field with over 40 years of experience' with stock warrants.

“I also encourage you to check out the work from our friend Dudley Baker. Dudley is the founder and editor of Common Stock Warrants. He’s been trading warrants for 40 years and has developed an exclusive database of all stock warrants trading in the U.S. and Canada. We’re paid-up subscribers as well”.

If we can be of service to you, reach out to Dudley at support@CommonStockWarrants.com

If other analysts and newsletter writers are subscribers that should tell you a lot of what we offer and the quality of our services.

JOIN US NOW - For A Month, A Year or a Lifetime

For the team,

Jeff Baker
Senior Analyst - Admin/Web Developer
B.Sc. Geological Sciences (UTEP)

BOOM – Gold Breaks Above $1300

June 2, 2019
By Dudley Pierce Baker
Common Stock Warrants

On Friday May 31st, Gold screamed above $1300 to close out the month and maintain the gains through the day as we closed at $1305.

We will know more as the markets open Sunday evening and Monday morning as to whether these gains will hold, but for now Gold has put in a very impressive move to the upside.

Precious metals investors know that the fate of their shares and warrants lie with the price of gold and silver going forward. The last several years have been a disaster for these investors, but times may be changing.

Below I present some charts for your review which I have been sharing with my subscribers.

If I can assist you with some investments ideas, whether precious metals companies or stock warrants trading on those company, I would like you to consider joining me immediately.

Gold Daily

Gold Monthly

Silver Weekly

HUI (Gold Bugs Index) Monthly


20 Days Left To Find Buying Opportunities in Gold

Our researchers have been glued to Gold, Silver and the Precious Metals sector for many months. We believe the current setup in Gold is a once-in-a-lifetime opportunity for skilled traders to stake positions below $1300 before a potentially incredible upside price move.  We’ve been alerting our members and follower to this opportunity since well before the October/December 2018 downside price rotation in the US markets.

October 5, 2018: Prepare for a gold and silver rally

December 9, 2018: Waiting for gold to erupt

Jan 25, 2018: Why everyone is talking about gold and silver

Additionally, our researchers called the bottom in the US equities markets and warned of an incredible upside price rotation setting up just before the actual price bottom occurred on December 24, 2018.

December 26, 2018: Has the equities selloff reached a bottom yet

Our research continues to suggest that Gold and Silver will rotate within a fairly narrow range over the next 3~5 weeks before setting up a likely price bottom near April 21, 2019.  We’ve been predicting this bottom formation for many months and have been warning our followers to prepare for this move and grab opportunities below $1300 when they set up.

This first chart, a Monthly chart showing our TT Charger price modeling system, clearly illustrates the strength of this bullish price trend and the initiation of this trend back in early 2016.  One of the strengths of the TT Charger modeling system is that it establishes a number of key price data points and trend factors.  The background color highlighted ranges show price range breadth and range expansion or contraction.  The dual channel facets show where price is likely to find support and resistance.  The DOT LEVELS show where critical support or resistance is in terms of the overall trend channels.

Right now, we are still in a bullish trend with key support near $1165.  The Dual Channel system is showing the $1260 to $1285 level is currently the most likely active support levels just below current price.  Thus, we could see a move to near these levels over the next 3+ weeks and I would suggest skilled traders jump on this opportunity.  The Range system is showing a current $250~350 price range, thus, any upside price breakout could easily rally within this range and push prices at least $250+ higher than current levels – likely well above $1550.  If range expansion sets up, we could see prices well above $1750.

 

We’ve authored hundreds of research posts over the past 12+ months and the one thing that we continue to mention is that Fibonacci price theory continues to operate on the premise that “price must always attempt to find and establish new price highs or lows – at all times”.  Please keep this in mind as we continue.

Take a look at the TT Charger chart, above, and the raw Monthly price chart, below.  Price must always attempt to find and establish new price highs or lows – so where is price going based on the most recent price rotations?  Let’s review…

After rallying in early 2016 to establish a price high of $1377.50, gold immediately rotated downward to establish a higher low near $1124.50.  The $1377.50 high price was a “new price high” in terms of previous rotational highs while the $1124.50 low was a higher low price rotation point.  Thus, a failed “new price low”.

Since these two price points, Gold has settled into a sideways price channel where new price highs and lows have been attempted, but have failed to breakout out of the existing previous high and low price levels.  As a technician of price, we can immediately identify this as a possible “Pennant or Flag” formation.  With the last “new price level” being a “new price high” we still believe that Gold will attempt to break above the recent high price levels and attempt a much bigger upside price swing.

Our analysis suggests the April 21 date as a critical date for the potential price bottom in Gold and Silver.  Our belief is that this date will like result in a near-term momentum bottom in price.  Where price may fall, briefly, below $1290 and rotate into a “washout low” price rotation.  The opportunity for this move could come 3~5 days before or after the April 21 date.

 

This last chart, a Monthly price chart, illustrating the Pennant/Flag formation in Gold should be the clearest example we can provide that Gold will soon break out to the upside and rally extensively higher if our research and analysis are correct.  The momentum that has built up over the past 2+ years, as well as the global demand for Gold by central banks and by investors as a hedging instrument, could prompt Gold and Silver to rally at least 50~60% in this first upside breakout wave – resulting in $1900 gold prices.  Silver could rally to well above $18~19 in a similar move and the number our researchers believe may become the upside target in Silver is $21.

This big picture chart and technical pattern could still take months to unfold if the price is to test the lower end of the trading range at $1225.  If our analysis is correct, Gold and Silver could begin an upside price breakout shortly after April 21 (very likely to become evident in early May 2019).  The upside potential for this move is at least $1550 in Gold and at least $18 in Silver.

Please understand that any upside breakout in Gold and Silver will likely be associated with general global market weakness including the potential for some type of global crisis event.  This could be related to the EU, BREXIT, China, France or any other nation burdened by debt, dealing with election turmoil or related to social or economic angst.  We could almost throw a dart at a map of the globe and hit some area that is poised for some type of economic crisis.

Gold – Gold chart by TradingView

Our last buy signal for gold and gold miners was in Sept 2018 and subscribers and our team profited from that $100 gold rally. This next opportunity here is to understand that we only have about 20~25 days to search out and isolate the best entry prices we can find in Gold and Silver before our April 21 momentum bottom date hits.  This means we need to prepare for this upside breakout move in Precious Metals and prepare our other open positions for the possibility of extended downside pricing concerns.  If you read our continued research posts, you’ll understand that we believe the US stock market will rotate a bit lower prior to this April 21 date and rally as well.

We believe the US equities markets will become a safe-haven, like Gold, where foreign investors can balance the strength of the US Dollar with the strong US economy and continued equity price appreciation while more fragile nations deal with economic crisis events and debt concerns.  Thus, we believe capital will flood the US markets after April 21 as evidence of these economic concerns drives foreign investors into US equities.

Take a minute to find out why Technical Traders Ltd. is quickly becoming one of the best research and trading services you can find anywhere on the planet.  We are about to launch a new technology product to assist our members and we continue to deliver incredible research posts, like this one, where we can highlight our proprietary price modeling systems and adaptive learning solutions.  If you want to stay ahead of these markets moves and find greater success in 2019 and beyond Join Our Wealth Trading Newsletter Today.

Chris Vermeulen

Your Best Opportunity For Wealth Creation

You can call me lucky if you want, I don’t care. I am only out to become wealthy in the next two years.

If you choose to sit out this coming rally you will have no one to blame but yourself, but don’t tell your spouse as they will  surely disown you, if you miss this opportunity.

This is Dudley Pierce Baker, the editor of http://JuniorMiningNews.com and http://CommonStockWarrants.com and I believe we are on the verge of a major move up in the resource sector.

Timing is everything in the markets and the timing seems to be on our side for resource investors.

The next two years are being talked about now by several newsletter writers and even by Jim Cramer (CNBC) as an excellent time to being investing in the precious resource sector.

In a few years, some investors will think they are smart as heck when if fact they are just lucky to have been invested in the resource sector at this particular time.

So, timing will prove the expression correct, that 'it is better to be lucky than to be smart'.

The important take away for you as an investor is that the stage has been set (bottoms are in and bases built) and the next two years may well present investors with an explosive rally in silver, gold, copper and possibly uranium.

Simon Constable writing for TheStreet.com, Why It's a Good Time to Invest in Copper has an interview with Jim Cramer on Freeport-McMoRan: Prices Are Exploding.



I own a small copper company operating in Nevada currently selling for C$0.11. Over the last decade or so these stares have climbed to C$4.00. Whether the shares can reach C$4.00 again in the next two years, I surely do not know, but, I have a really nice position of hundred ’s of thousands of shares in this company, just in case, I get lucky.

Our colleagues at TheTechnicalTraders are looking for the next two years to possibly take silver and gold to new highs but probably at least to the previous highs of $50 and $1900, respectively. You will definitely want to read their latest article and see their charts.

Best Precious Metals Investment And Trading For 2019

I own many silver and gold companies and some even have stock warrants trading which can provide investors an even greater reward over the next two years, if we get lucky.

Some warrants I own on one of my favorite gold companies, in my opinion, could ‘easily’ sell for over C$5.00, and they currently sell for a mere C$0.22.

I know that sounds crazy but you see I expect to ‘get lucky’ and make a fortune on just this one position.

I own a nice position in a silver company which recently completed a private placement in which I participated and greatly increased my position. The shares are currently selling for C$0.13 and, in my opinion, could  ‘easily’ sell for well over C$1.00, if I get lucky. Another wealth building opportunity.

It is impossible to say how high some of these shares or warrants could go in a rip roaring bull market, but my (best read article ever) addresses the possibilities of outrageous gains ahead,

Gold and Silver Stocks, How High Can They Go

Frank Holmes, Rick Rule, David Morgan are in the camp of substantially higher prices.

If you would like to ‘get lucky’ with me, I encourage you to join me as a subscriber.

My Gold and Lifetime Subscribers have access to my personal portfolio and to my weekly audio and you will know exactly my views and current positions.

When I ‘get lucky’ this just might be the perfect time to hang it up and move to a sleepy little fishing village in Mexico, but hell I have already done that. So maybe I will need to seek out a new opportunity/adventure.

Life is great but it is going to be greater yet, when I (and hopefully you as a subscriber) become wealthy or wealthier in the next few years.

JOIN ME NOW, folks, I mean now do not delay this incredible wealth building opportunity.

Dudley Pierce Baker
Chapala, Jalisco, Mexico
Founder - Editor
http://JuniorMiningNews.com
http://CommonStockWarrant.com

Best Precious Metals Investment And Trades For 2019

It’s been years since the gold and silver topped out in 2011. We have been waiting for a new bottom form and a new bull market to emerge for nearly 8 years. In this article, I’m going to compare palladium, gold, platinum, and silver and show you which of these precious metals I feel is the best long-term investment and also the best trade for 2019.

The analysis presented below is based on technical analysis using previous significant highs, and Fibonacci extensions. Both of these techniques work exceptionally well for predicting price targets both to the upside and also price corrections to the downside. If you have never used Fibonacci retracement or extensions in your trading I highly recommend learning more about them. I have no doubt it will improve your market price projection targets for your investments. I have found this technique to be the number one best trading tool for projecting future price movements in all asset classes.

The charts below will show to price forecasts for each metal. The first price target is based on the previous significant high that price made between 2000 and the current timeframe. Previous significant highs are typically the first target for the price to reach and that is also our first major upside target for these metals. The second price target I use is based on Fibonacci extensions using stand out lows formed anywhere between 2002 to the current price time and projecting that forward into the future beyond the previous highs shown on the charts.

So let’s get started with the worst precious metal to invest in and work your way down to the best precious metal.

 

#4 PALLADIUM

Palladium, In my opinion, is the worst precious metal to own for 2019. While palladium is used in everything from dentistry to groundwater treatment, Palladium is by far the most versatile precious metal. Only a little while ago palladium was not nearly as popular as it is today due to the incredible economic growth in developing countries especially China. This multi-use metal is steadily growing its importance in the markets hence the strong performance to date.

There is no doubt that Palladium has staged a massive rally from the 2009 lows and also another mega-rally from the 2016 low. But, knowing the best performing investments eventually become the worst performing investments later, let’s take a look at the chart of Palladium and see why I feel as though Palladium is the worst investment metal for 2019.

The monthly chart of Palladium below shows the previous high in price in the year 2000. That high has been broken and now the price has gone parabolic blasting above that level to the 1550 mark. At this point, the previous high target has been breached and we no longer see that as a price target. There is zero upside potential based on the previous high.

The second price target is based off the lows in 2016 using the Fibonacci extension the pullback in 2018 followed by this recent rally. This gives us a price projection of nearly $1500 an ounce. As you can see this perfect bull flag (continuation pattern) has reached the hundred percent Fibonacci measured target of 1500. Therefore I see this upside move as being complete and it is more likely to pull back and correct in 2019 with 0% upside potential. Anything beyond this price level is a bubble which could burst at any time and carries a high level of downside risk.

 

#3 GOLD

Gold is the second worst investment for 2019 when it comes to precious metals in my opinion based on potential upside growth. Keep in mind I am very bullish on the price of gold looking forward but other metals definitely have a lot more profit potential than gold.

As you can see on the monthly chart of gold the previous high was about $1900 in 2011. That level is our first price target for gold upon a breakout of this multiyear basing formation it has been forming since 2013. This makes for a potential gain of 46% in price.

Now if we apply a Fibonacci extension to get our second target we take the low from 2002 to the high in 2011 and bring it back down to the low in 2015. This gives us an upside price target of $2681 an ounce. Based at the current price of gold we could see gold rally 106% over the next year or two.

 

#2 PLATINUM

Platinum is the second best metal for short-term and long-term gains from 2019 and beyond. Looking at the monthly chart you can see the previous high in 2008 was around $2300 based on the current price if we get a move to the previous high it provides a 176% potential gain. Also, notice how the price is testing the major support level forms in 2008 this could act as a very significant double bottom in price as well.

Using Fibonacci extensions we take 2001 low up to 2008 high and back down to the recent low in 2018 or 2009 both are the same price this projected price gives us an upside target of $2659 an ounce. Based on the current price of platinum that gives us the 221% potential gain over the next couple of years.

 

#1 SILVER

The number one precious metal to own in 2019 and beyond is silver. Based on the previous high in 2011 and looking at the current price of silver there is a potential upside gain of 226%. Also, notice how silver is putting in a potential double bottom from the 2015 lows it also goes all the way back on the chart to 2006 through 2010 as a key support zone. Much like platinum, silver is at support and could very easily start a new mega-rally at any time.

Using a Fibonacci extension, we can get our second target for silver based on 2002 low and 2011 high along with the 2015 bottom. This gives us a $59 price target. With the current price of silver trading at $15 an ounce, there is an upside target of 296% potential gain over the next couple of years when silver starts its next bull market. In fact, I recently purchased a couple more silver bars from SDBullion to add to my silver stacks because I like the potential.

 

CONCLUSION:

In short, I feel precious metals should be a part of everyone’s portfolio as a long-term hedge and investment. I see precious metals as an insurance policy in case all hell breaks loose in the financial system and we need to fall back to something with physical value for a short period of time.

With that said, I am a firm believer that you should never overload in one particular investment or asset class. But I do feel certain metals should have a heavier weighting based on their current potential. The more upside potential the more of that metal you should own shares or physical bullion.

How should you invest and trade precious metals? There are a few ways to own metals as a trader and investor. You can own physical bullion rounds or bars and I don’t recommend coins simply because you pay a premium for a design and if metals ever do become a true currency the added value you paid for a design stamped in the metal will be tossed out the window and you lose that value as price will be based purely on weight.

A really simple way to trade and invest in metals are trading the ETFs for each bullion like Gold (GLD), Silver (SLV), Platinum (PLTM), and Palladium (PALL). Another and even more simple way is to own the GLTR fund which owns a basket of Gold, Silver, Platinum, and Pallium. Obviously owning precious metals mining stocks is another (GDX, GDXJ, JNUG, NUGT etc..)

If you want to join a group of professional traders, researchers, and friends, take a look at our trading newsletter to learn how we can help you find and execute better trades each month.  We believe 2019 and 2020 will be incredible years for skilled traders and we are executing at the highest level we can to assist our members.  In fact, we are about to launch our newest technology solution to better assist our members in creating future success.

Our team has 53 years of experience in researching and trading makes analyzing the complex and ever-changing financial markets a natural process. We have a simple and highly effective way to provide our customers with the most convenient, accurate, and timely market forecasts available today. Our stock and ETF trading alerts are readily available through our exclusive membership service via email and SMS text. Our newsletter, Technical Trading Mastery book, and 3 Hour Trading Video Course are designed for both traders and investors. Also, some of our strategies have been fully automated for the ultimate trading experience.

http://TheTechnicalTraders.com

RECENT CLOSED TRADES

Chris Vermeulen
Technical Traders Ltd.


The Curse Of PDAC (2019) One Day Early

By Dudley Pierce Baker
Founder - Editor
Common Stock Warrants
Junior Mining News

Are you superstitious?

Seems this 'curse' appears every year as investors, mining executives, newsletter writers, etc. prepare for the big event -

The Prospectors & Developers Association of Canada Convention (PDAC)

PDAC started today March 3 and runs through March 6 in Toronto, Canada.

Sometimes the mining sector is rallying just before the convention but in 2019, gold and the miners have been slowly declining the last week or two, but on Friday, March 1st, gold took a big hit and was down $20 to close at $1293. Silver also sold off and was down .39 to close at $15.19.

Of course this seems most years to temper the enthusiasm of all attendees and it now 2019 will not be any different.

In 2011 the Financial Post had an article on the curse:
"The annual Prospectors & Developers Association of Canada Convention might be the most anticipated event of the year for the global mining community, but it hasn’t always been the most rewarding one for investors.

The TSX Venture exchange, home to a slew of junior miners, has tended to outperform in the months leading up to the convention but drastically underperform in the months after."

In 2016 - Can The Market Survive the PDAC Curse? (Kitco.com)

“I think we have seen things move pretty hard in one direction so it makes sense to see a pullback,” said Brent Cook, author of the newsletter Exploration insights.

Gwen Preston, author of Maven Resources, agreed that precious metals markets and mining stocks could see a pullback in the near-term; however, she added that the correction might not be as deep as some are expecting because many investors are waiting to buy on dips.

Mickey Fulp, author of the Mercenary Geologist, agreed that although prices should correct in the near term, he doesn’t see a major correction. He added that instead of a curse, it could just be a “PDAC Hangover.”

2019 - This year Bob Hoye, ChartsandMarkets.com gives us his spin on the curse.

Is There Really a PDAC Curse for Mining Explorers? Bob Hoye - March 1, 2019

My personal take on 2019 is that gold and the miners were due for a pullback and we started that pullback a week or two ago and then Friday, March 1st put in an explanation mark. I believe most of the consolidation has been completed and while we may trend for a few weeks, it seems the markets will continue their uptrend soon at which time, we should take out that nasty overhead resistance around $1400.

Once $1400 is taken out it will no longer be possible to buy the mining shares on the cheap, as Louis James, TheIndependentSpeculator, writes in his recent article, When Gold Breaks $1400 It May Be Too Late To Profit.

"Gold rising and staying above $1,400 would make investors around the world sit up and take note.... I fully expect every gold and silver stock in my portfolio to deliver triple-digit gains as gold heads up toward $1,400... The very best stocks could see four-digit gains if gold keeps heading higher...."

We will not be attending PDAC this year, but trust all attendees with find the conference up to their standards and will walk out with many great ideas as to which companies shares and/or stock warrants, convertible securities or options to buy soon, real soon.

 

 

 

Stock Warrants | Wikipedia

Stock warrants are defined on Wikipedia, https://en.wikipedia.org/wiki/Warrant_(finance):

"In finance, a warrant is a security that entitles the holder to buy the underlying stock of the issuing company at a fixed price called exercise price until the expiry date. Warrants and options are similar in that the two contractual financial instruments allow the holder special rights to buy securities."

Common Stock Warrants provides a database of stock warrants trading in the United States and Canada in all industries and sectors. The service has been in existence since May 2005 and was initially named, PreciousMetalsWarrants.com. In 2013, services were expanded and the name was changed to CommonStockWarrants.com.

CommonStockWarrants provides:
A Database of all trading warrants in the U.S. and Canada
A Listing of all trading warrants

Ownership of CommonStockWarrants is the sole property and responsibility of Dudley Pierce Baker.

Articles on stock warrants by Dudley Pierce Baker have appeared on many websites, including Kitco. 321Gold, Goldseek, TheMorganReport, 24HourGold, TalkMarkets, SeekingAlpha and many more.

Videos and interviews have been done with BNN, FuturesMagazine, ResourceWorld, EllisMartinReports, KorelinEconomicReports, PalisadeRadio, TheGoldReport, TheFinancialSurvivalNetwork, JayTaylor and others.

Books - In 2017, "The Stock Warrant Handbook, Your Personal Guide To Stock Warrants" was written by Dudley Pierce Baker and is a useful research tool to all investors:

Chapter Titles:
What is a Warrant?
Background and History of Warrants
Why You Should Consider Warrants
A Warrant On What?
Market Timing
Portfolio Allocation
Private Placements vs. Trading Warrants
How I Determine Current Values
Are You A U.S. or Canadian Investor?
Brokerage Firms
How to Place Your Trades

The Stock Warrant HandBook, Your Personal Guide to Trading Stock Warrants is available free to visitors of http://CommonStockWarrants.com and is also available on Amazon.com.

Excerpts from Wikipedia, the free encyclopedia:

Warrants are frequently attached to bonds or preferred stock as a sweetener, allowing the issuer to pay lower interest rates or dividends. They can be used to enhance the yield of the bond and make them more attractive to potential buyers. Warrants can also be used in private equitydeals. Frequently, these warrants are detachable and can be sold independently of the bond or stock.

In the case of warrants issued with preferred stocks, stockholders may need to detach and sell the warrant before they can receive dividend payments. Thus, it is sometimes beneficial to detach and sell a warrant as soon as possible so the investor can earn dividends.

Warrants are actively traded in some financial markets such as German Stock Exchange (Deutsche Börse) and Hong Kong.[1] In Hong Kong Stock Exchange, warrants accounted for 11.7% of the turnover in the first quarter of 2009, just second to the callable bull/bear contract.[2]

Structure and features

Warrants have similar characteristics to that of other equity derivatives, such as options, for instance:

  • Exercising: A warrant is exercised when the holder informs the issuer their intention to purchase the shares underlying the warrant.

The warrant parameters, such as exercise price, are fixed shortly after the issue of the bond. With warrants, it is important to consider the following main characteristics:

  • Premium: A warrant's "premium" represents how much extra you have to pay for your shares when buying them through the warrant as compared to buying them in the regular way.
  • Gearing (leverage): A warrant's "gearing" is the way to ascertain how much more exposure you have to the underlying shares using the warrant as compared to the exposure you would have if you buy shares through the market.
  • Expiration Date: This is the date the warrant expires. If you plan on exercising the warrant, you must do so before the expiration date. The more time remaining until expiry, the more time for the underlying security to appreciate, which, in turn, will increase the price of the warrant (unless it depreciates). Therefore, the expiry date is the date on which the right to exercise ceases to exist.
  • Restrictions on exercise: Like options, there are different exercise types associated with warrants such as American style (holder can exercise anytime before expiration) or European style (holder can only exercise on expiration date).[3]

Warrants are longer-dated options and are generally traded over-the-counter.

Secondary market

Sometimes the issuer will try to establish a market for the warrant and to register it with a listed exchange. In this case, the price can be obtained from a stockbroker. But often, warrants are privately held or not registered, which makes their prices less obvious. On the NYSE, warrants can be easily tracked by adding a "w" after the company's ticker symbol to check the warrant's price. Unregistered warrant transactions can still be facilitated between accredited parties and in fact, several secondary markets have been formed to provide liquidity for these investments.

Comparison with call options

Warrants are very similar to call options. For instance, many warrants confer the same rights as equity options and warrants often can be traded in secondary markets like options. However, there also are several key differences between warrants and equity options:

  • Warrants are issued by private parties, typically the corporation on which a warrant is based, rather than a public options exchange.
  • Warrants issued by the company itself are dilutive. When the warrant issued by the company is exercised, the company issues new shares of stock, so the number of outstanding shares increases. When a call option is exercised, the owner of the call option receives an existing share from an assigned call writer (except in the case of employee stock options, where new shares are created and issued by the company upon exercise). Unlike common stock shares outstanding, warrants do not have voting rights.
  • Warrants are considered over the counter instruments and thus are usually only traded by financial institutions with the capacity to settle and clear these types of transactions.
  • A warrant's lifetime is measured in years (as long as 15 years), while options are typically measured in months. Even LEAPS (long-term equity anticipation securities), the longest stock options available, tend to expire in two or three years. Upon expiration, the warrants are worthless unless the price of the common stock is greater than the exercise price.
  • Warrants are not standardized like exchange-listed options. While investors can write stock options on the ASX (or CBOE), they are not permitted to do so with ASX-listed warrants, since only companies can issue warrants and, while each option contract is over 1000 underlying ordinary shares (100 on CBOE), the number of warrants that must be exercised by the holder to buy the underlying asset depends on the conversion ratio set out in the offer documentation for the warrant issue.

Pricing

There are various methods (models) of evaluation available to value warrants theoretically, including the Black-Scholes evaluation model. However, it is important to have some understanding of the various influences on warrant prices. The market value of a warrant can be divided into two components:

  • Intrinsic value: This is simply the difference between the exercise (strike) price and the underlying stock price. Warrants are also referred to as in-the-money or out-of-the-money, depending on where the current asset price is in relation to the warrant's exercise price. Thus, for instance, for call warrants, if the stock price is below the strike price, the warrant has no intrinsic value (only time value—to be explained shortly). If the stock price is above the strike, the warrant has intrinsic value and is said to be in-the-money.
  • Time value: Time value can be considered as the value of the continuing exposure to the movement in the underlying security that the warrant provides. Time value declines as the expiry of the warrant gets closer. This erosion of time value is called time decay. It is not constant, but increases rapidly towards expiry. A warrant's time value is affected by the following factors:
    • Time to expiry: The longer the time to expiry, the greater the time value of the warrant. This is because the price of the underlying asset has a greater probability of moving in-the-money which makes the warrant more valuable.
    • Volatility: The more volatile the underlying instrument, the higher the price of the warrant will be (as the warrant is more likely to end up in-the-money).
    • Dividends: To include the factor of receiving dividends depends on if the holder of the warrant is permitted to receive dividends from the underlying asset.
    • Interest rates: An increase in interest rates will lead to more expensive call warrants and cheaper put warrants. The level of interest rates reflects the opportunity cost of capital.

Uses

Warrants can be used for Portfolio protection: Put warrants allow the owner to protect the value of the owner's portfolio against falls in the market or in particular shares.

Risks

There are certain risks involved in trading warrants—including time decay. Time decay: "Time value" diminishes as time goes by—the rate of decay increases the closer to the date of expiration.

References

External links

Interactive Brokers | Stock Warrants

February 24, 2019
Dudley Pierce Baker

 

 

 

Interactive Brokers is my go-to brokerage firm as they will execute trades in the United States or Canada as well as other exchanges in the world.

Many of the warrants trading on the resource companies and marijuana companies trade on either the Toronto Stock Exchange (TSX), the Toronto Venture Exchange (TSXV) or the Canadian Stock Exchange (CSE).

If I discover a warrant trading which is not yet in the Interactive Brokers system, I notify them and they add that warrant asap so that I and others can trade.

If you are a U.S. investor you may find your brokerage firm will not allow you to trade the Canadian securities (unless they have a U.S. assigned symbol). Most of the Canadian shares will have a U.S. assigned symbol and perhaps 80% of the warrants have an assigned symbol facilitating trading in the United States.

For me I don’t want worry about, will they or want they, handle my trades.

I know there are other firms, i.e., PennTrade which also has a great system and allows for U.S. and Canadian trading.

For more information on warrants, visit my website and download your Free copy of “The Stock Warrants Handbook, Your Personal Guide To Trading Stock Warrants”.

Good Trading,

Dudley