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Post by sportsrancho on Mar 7, 2019 17:45:43 GMT -5
Also people that buy options very rarely exercise them, they just sell them because if you exercise them you lose the 30% premium that the option gives you. So if you thought the stock was going to go up you’d wait for the news and sell the warrants ( if you were thinking it was a pump and dump) and the stock was going go back down.
That’s my thought, I could be way off..I’m sure someone else has thoughts, or more knowledge with trading warrants.
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Post by goyocafe on Mar 7, 2019 17:58:00 GMT -5
I had warrants on AIG, they actually gave me five for free because I bought in at the very end of the recession when they were in risk of staying alive. Their expiration was 10 years. Three years later I did decided to sell them. I pushed the sale button and got $3,500 deposited into my account. Now if I had had them converted to shares the brokerage account could’ve done that for me automatically also. It just takes minutes. Of course this could be a whole different situation but that’s my only experience with it. I suspect that a warrant holder could convert to stock at the warrant price (assuming the price has gone up substantially) and hold for 12 months and reduce taxes to capital gain levels, but there's risk in holding this stock for 12 months.
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Post by traderdennis on Mar 7, 2019 19:31:38 GMT -5
For those that have the 1.60 warrants, if you’ve not already done so, you might want to excercise them now in preparation for the next news release. IMO Sports, you just relax, slow deep breaths. why on earth would they want to exercise them before news? ?? If there was amazing news tomorrow, say the company was being purchased for $100 per share, warrant holders wait for the news, sell FIRST at 99.99 per share, cover with 1.60 or 2.38 warrants. the key is the warrant holders would always sell first and then have their broker or the company exercise the shares to cover. A few years back, I was with TDAmeritrade and had a very thinly traded option near expiration. It was deep in the money and had a negative intrinsic value, eg $10.00 option the underlying trading at 12.00 and the bid price on the option was never above 1.80. So TDA let me go short way above what I had left on margin then they exercised the deep in the money options to cover the very short term short.
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Post by brotherm1 on Mar 7, 2019 20:03:49 GMT -5
Answer me this Dennis. how does one excercise warrants to shares and how long does it take?
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Post by agedhippie on Mar 7, 2019 20:52:45 GMT -5
Answer me this Dennis. how does one excercise warrants to shares and how long does it take? It can take a few days. If you want to exercise your warrants you short the stock at the same time you give the broker the order to exercise the warrants. That stops the price from moving against you in the interval between saying you want to do it and getting the stock in your account. When the stock arrives you settle the short position with the stock.
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Post by prcgorman2 on Mar 7, 2019 21:03:18 GMT -5
If the stock price is any indicator of scripts tomorrow... It NEVER has been before, so that's a highly questionable "if"... Really? NEVER? On what do you base your assertion?
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Post by brotherm1 on Mar 7, 2019 21:35:47 GMT -5
Answer me this Dennis. how does one excercise warrants to shares and how long does it take? It can take a few days. If you want to exercise your warrants you short the stock at the same time you give the broker the order to exercise the warrants. That stops the price from moving against you in the interval between saying you want to do it and getting the stock in your account. When the stock arrives you settle the short position with the stock. So for example, I believe there will be news to send the stock to $2.85 soon. I ask the broker to excercise my 1M warrants at $1.60 and short at todays price of $1.85. In a few days the stock does happen to hit $2.85. I cover my short with the 1M shares from the warrants. How much did I make?
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Post by awesomo on Mar 7, 2019 23:03:30 GMT -5
Wait, what? Why in the world would you do that if you expect the stock to hit $2.85 in a few days? Surely you would wait for the news to hit and then do this.
But to answer your question, you would make .25 * 1M or $250,000.
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Post by awesomo on Mar 8, 2019 1:16:30 GMT -5
I think the point trader is making, and what you are trying to convey is the following scenario...
Suppose you believe the PPS will pop to $4 for whatever reason, but you also believe the PPS will fall immediately after the pop. Now if exercising warrants takes a few days, once the pop hits, put in the order to exercise the warrants at the same time as shorting the stock. This is effectively locking you into the $4 price regardless if the price drops after that (or goes up).
In conclusion, there is absolutely no reason for warrant holders to exercise beforehand even if they 100% expect a pop because they can play this strategy out whenever after the pop occurs.
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Post by parrerob on Mar 8, 2019 3:49:44 GMT -5
It can take a few days. If you want to exercise your warrants you short the stock at the same time you give the broker the order to exercise the warrants. That stops the price from moving against you in the interval between saying you want to do it and getting the stock in your account. When the stock arrives you settle the short position with the stock. So for example, I believe there will be news to send the stock to $2.85 soon. I ask the broker to excercise my 1M warrants at $1.60 and short at todays price of $1.85. In a few days the stock does happen to hit $2.85. I cover my short with the 1M shares from the warrants. How much did I make? Sorry brotherm1 but I really don't understand Your logic... if You had not done anything (not excercising the warrants and not shorting shares) you would have earned 1 million $ more. Excercise warrants at $1.6 for 1 million shares.... You pay $1.6 million You short the stock at $1.85 (You have an income of 1,85 million dollar) then cover with warrant. Your gain is the difference. Your gain is $250K and following Your example PPS is at $2,85 In this case If You just keep Your 1 Million warrants and excercise after that You are sure PPS reach 2.85$ Your gain is: 1 Million * (2,85 - 1,6) = $1.250.000 Instead I believe We will see pump and dump here for the following months.... and $1.6 will be a key area. Don't forget the same owner of the warrants has also 26 million shares already in the pocket to play with ..... They will play with the shares already bought and they will keep warrants as an assurance for their game. This is for sure in my opinion.... The mistery is what game they want to play: "up or down, or both ?".... With the warrants acting as assurance they can play for free in any direction....
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Post by brotherm1 on Mar 8, 2019 8:04:00 GMT -5
I would not have shorted at $1.85, I was giving an example using Aged’s thinking above. In fact I would not short at all. My thoughts are based upon a share and warrant holder looking for quick money and without the desire to keep playing. Deerfield for example, was referred to many times on this board as a company with a strategy to make a quick profit from shares and get out.
If one had very good reason to believe news was on the way to pump the stock, they could hold their 1M portion of shares purchased at $1.50, pay $1.6M to exercise their 1M warrants into 1M in shares (that they would receive in a few days after requesting to do so), and when the price hits $2.85 with good volume, sell their total 2M shares. Profit from original shares would be $1.35M, profit from warrants converted to shares would be $1.25M for a total profit of $2.6M and they’re out.
Someone said on this board that there are many more than just one holder of the $1.60 warrants. If that’s the case, I would think not all would use one same strategy.
You might be right. Perhaps the warrant holders are all professional traders that play the hedge game and will keep trading. I don’t know. I guess we might see within this year or so. Thanks for the discussion.
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Post by cretin11 on Mar 8, 2019 8:15:24 GMT -5
It NEVER has been before, so that's a highly questionable "if"... Really? NEVER? On what do you base your assertion? I’ve been following MNKD since well before there were any scripts. I’ve watched every Friday and have yet to see it happen. Actually, there was the one time when an innocent mistake happened, the monthly script count was mistakenly posted as the weekly count. So it looked like the huge breakout week we had all been hoping for. Share price DID react that day, quite dramatically. Unfortunately when the mistake was discovered the share price went back down. So I’m not counting that time since it was an error. I know some folks here will remember that day.
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Post by dh4mizzou on Mar 8, 2019 8:37:59 GMT -5
It can take a few days. If you want to exercise your warrants you short the stock at the same time you give the broker the order to exercise the warrants. That stops the price from moving against you in the interval between saying you want to do it and getting the stock in your account. When the stock arrives you settle the short position with the stock. So for example, I believe there will be news to send the stock to $2.85 soon. I ask the broker to excercise my 1M warrants at $1.60 and short at todays price of $1.85. In a few days the stock does happen to hit $2.85. I cover my short with the 1M shares from the warrants. How much did I make?
The short answer is you'll make the difference between the Warrant price ($1.60) and the Short price ($ 1.85) or in this case +.25 per share.
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Post by markado on Mar 8, 2019 8:54:43 GMT -5
So for example, I believe there will be news to send the stock to $2.85 soon. I ask the broker to excercise my 1M warrants at $1.60 and short at todays price of $1.85. In a few days the stock does happen to hit $2.85. I cover my short with the 1M shares from the warrants. How much did I make?
The short answer is you'll make the difference between the Warrant price ($1.60) and the Short price ($ 1.85) or in this case +.25 per share.
So, in this case, better to exercise the warrants understanding the momentum to the upside, sell at the higher SP and pocket $.50 more per share, even net of short term capital gains tax.
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Post by traderdennis on Mar 8, 2019 9:03:44 GMT -5
It can take a few days. If you want to exercise your warrants you short the stock at the same time you give the broker the order to exercise the warrants. That stops the price from moving against you in the interval between saying you want to do it and getting the stock in your account. When the stock arrives you settle the short position with the stock. So for example, I believe there will be news to send the stock to $2.85 soon. I ask the broker to excercise my 1M warrants at $1.60 and short at todays price of $1.85. In a few days the stock does happen to hit $2.85. I cover my short with the 1M shares from the warrants. How much did I make? Brother, you are thinking like a retail trader. these funds have huge account and millions of dollars in margin available. If they are expecting a pump up to 2.85 they would not short the stock at 1.85 and NEVER exerciser their options early. They would keep their position flat until around the price of the pump at 2.85 next friday. They short on friday at 2.80 for example. They still will not exercise their warrants until december 2019 since the stock could fall under 1.60 and they would just buy it back below the warrant price. There are only a very few scenarios where warrants would exercise early. The stock would need to double or triple overnight. Say the price is $6.00 they may sell and exercise to bank a massive profit, still they may sell and see if the stock fades before exercising. The easy assumption is that warrant money will not hit until December and the stock price will need to be over 1.60 in late December for it to happen.
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