1. No scalp trading today. Looking at the current market better stay sideline, unless a better sentiment and clearer direction ahead else i would not buy any for now.
2. Bought in AMFIRST today at RM1.16, expecting the coming DPU to be on end April. :) Received my STARREIT DPU finally. This give me more credit limit to buy AMFIRST. :)
3. Today would like to talk about GENS-CC on request from my shares investment comrade hng. :)
Listing Information & Profile for Structured Warrants
Instrument Type : Structured Warrants
Type of Structured Warrants : Call Warrants
Description : NON-COLLATERALISED CASH SETTLED EUROPEAN-STYLE CALL WARRANTS
Underlying Stock : GENTING SINGAPORE PLC
Issuer : OSK INVESTMENT BANK BERHAD
Stock Code : 0539CC
Stock Short Name : GENS-CC
ISIN Code: MYJ0539CCLA5
Board : Structured Warrants
Sector : STRUCTURED WARRANTS OTHERS
Initial Listing Information :
Listing Date : 12/10/2010
Term Sheet Date : 05/10/2010
Issue Date : 08/10/2010
Issue/ Ask Price : MYR 0.1500
Issue Size in Unit : 60,000,000
Maturity Date : 07/10/2011
Exercise/ Strike/ Conversion Price : SGD 1.9500
Revised Exercise/ Strike/ Conversion Price : MYR 0.0000
Exercise/ Conversion Ratio : 8:1
Revised Exercise/ Conversion Ratio :
Settlement Type/ Convertible into : Cash
Name and contact details of the market maker (if applicable) : OSK Investment Bank Berhad
First rule of thumb on trading call warrant, never keep them as an investment for long term unless you know the underlying share just about started to run from bottom. Always remember you are dealing with trading not investment, so please refer to my previous posts on understanding call warrants here.
The most for one to keep for call warrant only in term of number of days not keep till expiry date unless you know for sure the mother share just about to start it rally up and having an extremely undervalue price else when you see profit you need to SELL. This is the only right thing to do.
What to look for when trading call warrant ? See what i have it bold above some of the important information before we decide to buy or not. We must understand the relationship between mother share and its warrant, mother go up naturally its warrant will go up, likewise, when mother down warrant will go down as well. Simple logic, but sometime you may ask by how much the warrant will move if mother go up. Just look at the conversion ratio above as a guide, e.g 8:1 mean mother need to go up 8sen rightfully for warrant to go up 1sen. This may not accurately define it is always as such but most of the time it is being used as a guide to guage the moving of warrant (if one don't believe me, can try take a look at one counter with warrant tomorrow), other factor may affect the gap between mother and warrant, like expiry date and conversion price. The other factor also very very very important and extremely important is it Premium. One need to calculate its premium before making a move. The longer period it is, people will willing to pay higher premium, the nearer to expiry date the lower premium it will be. We can't treat warrant as normal share as warrant has very short time frame about 6 months to 1 year, so it is not suitable for long term investment.
Now come back to GENS-CC, let us assess and see what we have for this call warrant :-
A. Let work out the premium first by using the following formula :-
Premium/(Discount) = ((Exercise - Underlying) * Exchange Rate + (CW * Ratio)) / (Underlying * Exchange Rate)
** Mother Share Price (GENS) = S$ 1.93
** Call Warrant Price (GENS-CC) = RM 0.085
= ((1.95 - 1.93) * 2.4 + (0.085 * 8)) / (1.93 * 2.4)
= 0.157
Convert to % = 0.157 * 100 = 15.7%
Note : Premium is the lower the better.
B. Expiry Date = 7/10/2011 still have 219days left, about 7 months.
This is how i give the premium, 1 month i give 0.5% higher, so 7 months GENS-CC should have a premium of 7 * 0.5 = 3.5% for now.
C. Conclusion, fair value for GENS-CC basing from what i rated the premium is 3.5% but currently is it trading at so high premium at 15.7%, so worth to buy ?? you tell me. I will not buy in for now definitely as it is already out of money. Of course, one may say, still long time to expiry, mother will go high up to SGD 3 one day but the question is when ? it may expired but i still stay at high premium, yes, the advantage for now is long time but paying so high premium, who want ?? you stupid kah ?? like i tell you my market price for this house is 35K, i want to sell it to you at 157K. You want or not ?? Common sense tell you not to buy. This we call out of money, but when mother goes up back, my premium reduce, yes, it has to be 3.5% then only i buy in else don't look at it at all.
D. So, what happen you have bought it ?? Nothing much you can do, pray hard for mother to go up before expiry or cut loss. When mother go back up and it trading at right premium i buy back else don't touch. Note that you should always adjust your premium lower by 0.5% for every month passed as it is the time decay we need to deal with, no choice. Doesn't mean now GENS-CC trading at 0.085sen is considered cheap, cheap is in the sense of premium, negative is the best not the price. Remember that.
NOTE : Above just my sharing, may not necessary reflect your situation. You can opt to ignore. Your choice.
9 comments:
Horse
Many thanks for your thorough analysis and sharing of your own experience on call warrant. I'll forward your information to my friend. Thanks again :)
Now i begin to like what i read here,, thank you for sharing,sincerely
hng,
MOH already gave a green light to continue cos they r the expert in doing IFM business.they covered northern n east malaysia n most lightly they will take over the southern side business from pantai.u know khazanah can do wonders n tht's the reason why i like tht.even though redicare is covering central n pantai is on southern,they still use most of the equipments from faber n i have no worry on the price being bashed down. the reason tht i can c why it was bashed down cos sarawak election is coming, gov. would like to delay n MIGHT award the east malaysia IFM business to sarawakian ppl. even though someone else got it..the new player still have to sub it to faber..tht's my view. im quite bullish on ths.
therefore, i will go for 'LONG' n try to get some just now ..below 1.6 but cannot get.
Lofan
'MOH already gave a green light' where did you got the news? I've check online, there is no information except analyst report from RHB and Osk that Faber still awaiting extension of its concessionaire which is overdue since Oct last yr.
Lofan, what is your holding cost on Faber? Today seem recover a little bit, and just slight surpass on overall holding cost at 1.69
hng,
my cost is 1.67.
if the news r stated in any of the reports, i think we wont get ths price. universal trustee r not disposing anymore at the moment cos they earned so much earlier.their cost price is 1.00 after the hotels restructuring thingy.
i hope got they can push it down somemore so tht we can accumulate more.wht do think?
horse,wht do think on ths?..
Lofan
I'm still very concern of its renewal issue. i hope share can rebound further more, so that i can lock in handsome profit :)
hng & lofan,
very interesting discussion here from both of u about Faber. ;)
All i know for Faber is the non-renewal of contracts issue, others, we are dealing with uncertainty. Uncertainty means no direction, no direction means gamble, like what i did on RCECAP, i admit i stuck on this one on gamble, but gamble on high possibility of winning should be okay i think since Faber has been bashed down so badly, rebound to take a quick profit should be of high chance there. As mentioned in my earlier post, take a quick profit first no matter how, others just let it surface before taking any stance.
Good Luck to both of you. Faber is not my cup of tea unless it is for punting. :)
eugene,
Thanks. You are into call warrant trading as well ? This is not a long hual game. Still prefer DY investment. :)
Thanks for sharing your analysis on call warrant. I did try out the calculation on some warrant. But couldn't get any warrant with negative premium. Maybe can you name me some of the warrant with negative premium ? I would like to try out the calculation. Is this apply to Warrant ? Or maybe mainly for Call Warrant ?
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