vende en mayo y se van
I spent a few minutes considering if i were to get back in would i rather buy the equity or the .wt
before i share my findings let me say i will not touch the equity until managment is replaced so the warrants had a bit of an advantage but as you will see that is where the advantage ended.
I assumed a risk free rate of 2.9% im sure you borrow better but thats what it costs me. I considered the implied volatility the WTs had traded at, a wooping 90% explains the 5.5cents x 20 000 warrants that represent the data set. However, the underlying volatility is 13% over the last 2 years and only 11% since 1dec10 , youd think the underlying would be more volatile it sure felt that way but there wasnt much saw action just up then down down down down down. Also while working with this data set i noticed that .77 was not a closing high but just a print for less than 20k shares for some reason id thought it closed 77 one day .. anyhoo
I tried unsucesfully to attach my fincad excel spread sheet which shows the warrants iwith 90% implied vol have a 7.6% probability of settling in the money given the 5.5 cents premium paid for them and the current 27 sp and .75 excercise price. Worse news usiing a historical average stdev there was no probablity the warrants would be exercised. Dont jump on me yet , youre probably saying if they find gold it will spike .. while i disagree becasue of the humungous overhang but i looked at that too ussing the stdev that occured 2dec10 to 2jan11 a period that captures the midas pump of the already baked in hole we can use a 22% vol factor which also resluts in less than 1% chance of an itm settle for the warrants. oh boy.
so then i thought how long would it take to have a 50/50 chance of exercising the warrants i used the most generous vol factor i could stomach 45% half of the implied vol and half the historic i know thats not practice so ill discuss the findings of runnnig with implied vol in a moment. But with a 45% vol estimate it would take 9 years or 3285 days versus the 605 the warrant owners currently have just to be even odds at breaking even.
if one were to use the impied vol which is practice it would be about 2000 days which i found interesting because its about 3 times the number of days the warrants exist for (2 years from 11dec-10) and the stock is about a third the price it was when PP was priced.
all im looking for is a fair bet and given the useless managment the equity isnt appealing and given theres not enough days in a year ( wed have to spin 4.5 times faster ) i have no interest in 5 cent warrants and given the massive offer interest i think i saw 90k on top versus 20k on the bid that eventually got whacked i dont recomend the .wt as an averaging in strategy either.
vende en mayo y se van,
bingo