RE: RE: warrants Leverage
100,000 warrants ($16,500 @ $0.165) @ 1:20 = 5,000 shares ($62,500 @ $12.50)
$64,500 / $16,500 = 3.8 times leverage with 2 years to go
$0.165 x 20 = $3.30 above the strike price
Strike = $9.95 + $3.30 = $13.25
Current Price = $12.50
Premium = $0.75
Warrant buyers are paying about 1/4 up front for 2 years for a 6% premium.
Premium was a lot larger and it has come down as the share price has risen.
If s/p does hit $15. by March 2015 then the warrant holder buys for $9.95, approx. $5.00 discount. Warrant buyer today pays $3.30 to sell for $5.00 (time value disappears) later. $1.70 profit on 5,000 shares. 5,000 x $1.70 = $8,500 profit.
$16,500 investment with $8,500 profit = 51.5% profit with a move from $12.50 to $15.00?
Normal with no leverage is $2.50 on a $12.50 investment = 20%
That is my quick math with no double checking. Is it close?
If $15 s/p can happen in the next year, warrants should be $0.25 ($5.00 / 20) plus some time value.
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