OTCQX:SREMF - Post by User
Comment by
MrAndersonon Dec 29, 2010 8:20pm
1908 Views
Post# 17904319
RE: RE: RE: CLQ.WT:TSX 0.83 vs. CLQ:TSX 1.64
RE: RE: RE: CLQ.WT:TSX 0.83 vs. CLQ:TSX 1.64No, A warrant gives you the right to buy a share at a later date. So if you buy the warrant for
.83 it gives you the right to buy a single share at
.80 in the future.
So right now if you "exercised" that right you would pay an addition
.80 to buy the share (total cost is now $1.63) and you could sell it for about $1.63 so you get no gain.
Tomorrow if the share price goes up
.10 you would be up $.0.10, just like anyone who bought the share. But while you wait for those gains you have only laid out
.83 not $1.63 of your cash. Thus for the same investment dollars you can buy about twice as many warrants as you can shares because you do not have to spend the additional $$ unless you "exercise" the rights the warrant gives you.
Now you can also sell that warrant at some time in the future instead of "exercising" it.
The down side is, if the stock drops say to
.79 then your warrant is worthless. Because why would you want to spend an additional
.80 to buy a stock that is currently only selling for
.79. So in this situation where the person who bought actual stocks instead of warrants has a loss of 70% or so people who bought warrants have a loss of 100%.
This ability to gain or loose a higher % then the actual stock gains or looses is called "Leverage".
I hope I have explained that correctly.