Hi
NCPWZA $12.00 call warrants expiry 24/07/03 4-1 ratio traded at 5.8c
and 5.9c today giving an effective price of
around 23c for leverage over 1 News corp share.
NCP5M 12.00 call options expiry 24/07/03 1-1 ratio were on
offer from between 13&14c today last traded at 13.5c
giving a price of 13.5c for leverage over 1 News corp share.
Why such a big price difference ?
or what am I misunderstanding ?
Thanks
Andrew.
"Dave" <ozbrettdj@no-spam> wrote in message news:<3f10102c$0$23603$5a62ac22@no-spam>...
> "AP" <Focus@no-spam> wrote in message
> news:ht9qgv4lklh4eml3o50e4c8bape7ct95ml@no-spam
> >
> > Hi
> > NCPWZA $12.00 call warrants expiry 24/07/03 4-1 ratio traded at 5.8c
> > and 5.9c today giving an effective price of
> > around 23c for leverage over 1 News corp share.
> >
> > NCP5M 12.00 call options expiry 24/07/03 1-1 ratio were on
> > offer from between 13&14c today last traded at 13.5c
> > giving a price of 13.5c for leverage over 1 News corp share.
> >
> > Why such a big price difference ?
> > or what am I misunderstanding ?
> Warrants tend to trade at higher volatilities than options so they are more
> expensive.
That's not an explanation. The volatility which is relevant in options
pricing is the volatility of the underlying stock. If two options have
the same underlying then "their" volatilities (actually the
volatilities of the underlying their prices imply) must be identical.
Warrants may be systematically over-priced, or the original poster may
be mistaken (eg comparing end-of-day prices which are out-of-date in a
very thin market).
If warrants were systematically over-priced you could make money by
writing warrants and buying options... oops, you have to be a warrant
issuer to do that!
cheers,
-mt.