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Post by trenddiver on May 27, 2014 15:34:49 GMT -5
The warrants seem very underpriced at $3.47 giving a stock equivalent price of $8.15 per share for basically what amounts to a Jan. 2016 call. The Jan 2016 2.50 call is priced at 5.60 or $8.10 equivalent which also seems very cheap. It seems both of these derivatives give very little time or leverage premium. Maybe some of the Board's derivative experts can comment.
Trend
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Post by savzak on May 27, 2014 16:21:08 GMT -5
I own warrants but I don't do the comparative math analysis very often. I have noticed in the past that the warrants sometime lag a substantial price move in either direction. I always assumed that was because of limited liquidity. I suspect that if MNKD stays at or near $8 we might see the warrants appreciate a bit more yet.
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Post by ezrasfund on May 28, 2014 0:44:14 GMT -5
Are these the warrants that give you the right to buy 0.6 shares each? As I remember that calculation gives plenty of people headaches.
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Post by babaoriley on May 28, 2014 8:53:08 GMT -5
Those are they, ezra. Multiply current warrant price by 10/6, to give you the price to entitle you to one share, then add $2.40, which is what you then have to pay for a share if you exercise. I think you'll find a very modest premium, likely because they are well in the money at this point, similar to the January 2016, $2.50 strike calls.
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Post by biotec on May 28, 2014 15:51:32 GMT -5
Ive asked this before with no answer, If you had $20,000 to invest today, Would you do the stock or warrants and why?
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Post by babaoriley on May 28, 2014 16:36:41 GMT -5
Ive asked this before with no answer, If you had $20,000 to invest today, Would you do the stock or warrants and why? The reason you didn't get an answer from me, is because I find your question very personal and probing. Or perhaps, because I didn't see it. Assuming you did all of one or the other (nothing says you can't go half and half), you get 2500 or so shares (figuring $8 per share) or about 5,715 warrants (figuring $3.50 per warrant), which would entitle you to buy about 3,425 shares for $2.40, but you must act before they expire in February 2016. Whereas I like the additional 925 or so shares, I dislike that I will be forced to exercise at some point and to come up with $2.40 per share at that point. However, let's just assume you will trade your warrants right before expiry. Let's further assume the price of the stock is $18. For the 2500 share purchase, your investment would go from 20,000 to 45,000, a nice $25,000 gain. I believe I could sell the warrants with the stock priced at $18, for about $9.35 or about $53,500, so that's an even nicer gain. At $12 per share in Feb 2016, you still come out almost $3000 ahead going the warrant route. At $5 per share you lose less playing the stock than the warrants, maybe $1,500 less. So, the better the stock does, the better you do with the warrants, just leverage, plain and simple. At least that's how I figure it. |
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Post by brentie on May 28, 2014 16:49:02 GMT -5
Baba, instead of the warrants wouldn't you be better off buying January, 2016 $2.50 calls at $5.80? They are a lot easier to buy and sell and are about the same price.
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Post by biotec on May 28, 2014 17:17:45 GMT -5
Thanks Baba, I still think the warrants are a great price.Brentie thanks for the info. But I dont trade calls or puts. So with all that would you buy the warrants or the stock?
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Post by rak5555 on May 28, 2014 17:30:56 GMT -5
$4.00 8 12 16
5698.005698 -$14,529.91 -$854.70 $12,820.51 $26,495.73
2447.980416 -$10,208.08 -$416.16 $9,375.76 $19,167.69
biotec, here is an attempt to answer your question. For 20k and a warrant price of $3.51 and a share price of 8.17, you can either purchase 5,698 warrants or 2448 shares. the above table shows the net gain at different share prices. basically, you are better off w/ shares if the share price stays below 8 and you are better off w/ warrants if the pps is over 8.
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Post by rak5555 on May 28, 2014 17:39:50 GMT -5
Baba - you must have posted your response while I was busy ciphering. Good thing our answers are consistent. Brentie raises a good point about the illiquidity of the warrants.
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Post by liane on May 28, 2014 18:13:03 GMT -5
biotec,
There is no one good answer. At various times I have owned shares, warrants, calls, and various combinations. I have also sold puts. The market is not static, and my risk tolerance is not static. It's all about the market, your risk tolerance, and liquidity. Only you can decide that - and don't be afraid to change your mix if conditions change.
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Post by spiro on May 28, 2014 19:24:23 GMT -5
I hate these discussions about warrants, because it reminds me of being too stupid not to convert all my shares to warrants, when they selling for 37 cents. That's when they looked too good to be true. I only bought 12,000 for .37 and then 8,000 for .50 a couple of weeks later. I should have bought 200,000 like Baba did. When the warrants got pricey, I converted them all to $5 leaps, which provided more leverage at that time. I am currently using a sophisticated top secret options trading spreadsheet developed by a high tech military expert. Several other members of this board are also trial participants in this experimental spreadsheet project. I guess recently, I have been getting a little better using the spreadsheet, because the developer only called me stupid a couple of times today.
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Post by 4allthemarbles on May 28, 2014 20:45:51 GMT -5
Biotech- I looked up the other thread- my apologies for not responding. I think Liane is on the money. This all really depends on your comfort level and the type of risk you are willing to take.
That said- if everything goes as planned, partnership will follow FDA approval. Either way, you buy right now, you win. The stock is going to go up, and over the long term, probably way up. That said, to buy the stock outright now, it's going to cost you eight bucks a share. A year from now you'd be happy with that purchase.
Warrants- again, buy today and they will be worth a ton more down the road. You win on that play too.
Options- at the current price, I like the calls for numerous reasons, but mainly, to me, low risk and high reward & i feel like there are a few different ways to use them. I am not even looking at puts. Ultimately though, if you don't like options, they're not for you and it's your money, so buy what you like.
Sorry if I am stating the obvious...
So, what gives you more bang for the buck? With the current price, it looks like warrants, IMHO.
Just my quick, rambling thoughts.
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Post by savzak on May 28, 2014 21:42:41 GMT -5
Spiro, ixnay on the spreadsheet.
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Post by ezrasfund on May 28, 2014 22:33:29 GMT -5
Liquidity can be an important issue, especially if you want to sell when the price moves quickly. I can always sell shares within a few pennies spread in an instant. Near the money options can usually be sold pretty quickly, but the spread is wider. But when you get to deep in-the-money or out-of-the-money options, or the warrants, selling quickly at a fair price can be a problem.
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