Why Invest in ROI Warrants? Why invest in Warrants
A few weeks ago, I believe it was ferret who posted some information and comments about investing in warrants and I didn’t have time to make a comment. Typically warrants can provide a lot of leverage on the up side. I would expect a lot of the readers here understand.
To help those who don’t invest in Warrants
On the premise that you have $1,000.00 to invest, there are no brokerage fees to pay and you believe the share value of the company will increase over the next 18 months, what is the potentially different returns on investing $1,000.00 depending on whether you invest in shares, the 20 cent warrants or the 50 cent warrants.
Warrants provide a lot of leverage or a lot more bang for your buck when the price is low and you are of the view the price of the shares will increased substantially over the next few months.
Warrants can go up or down and are subject to bigger, quicker, swings in value both up and down, however the warrants in ROI have little room to go down, but a tremendous upside even at todays share price .
$1,000 invested in 50 cent warrants at 4 cents gets you 25,000 warrants.
$1,000 invested in 20 cent warrants at 8 cents gets you 12,500 warrants.
$1,000 invested in Shares at 18 cents gets you 5,555 shares.
Over the history of ROI the 50 cent warrants have lagged the value of the shares by between 11 and 17 cents. As the share price goes up and the time for exercising the warrant gets closer the lag usually gets larger as it moves toward the 50 cent differential.
The history of the 20 cent warrants is that they have lagged the value of the shares by 8 to 12 cents.
So if the price of the shares goes to 50 cents your 1,000.00 invested in shares will get a net return of $1,777.00. The 20 cent warrant will likely increase to about .40 cents for a return of $4,000.00. The 50 cent warrants will likely increase to about .34 cents for a return of $7,500.00.
If the price of shares goes to 1.00 your $1,000.00 invested in shares will get a net return of $4,555.00 The 20 cent warrant will likely increase to about 90 cents for a return of $10,250.00. The 50 cent warrants will likely increase to about 84 cents for a return of $20,000.00.
If the price of shares goes to $2.00 your $1,000.00 invested in shares will get a net return of $10,110.00. The 20 cent warrant will likely increase to about $1.85 for a return of $22,125.00. The 50 cent warrants will likely increase to about $1.70 for a return of $41,500.00.
The gaps between the warrant price and the share price get closer to the warrant exercise price of 20 cents or 50 cents as the share price goes up and the time before you need to exercise the warrant gets closer.
The above is just an example to help explain for those who do not typically invest in warrants.