by Travis Johnson, Stock Gumshoe | January 16, 2014 3:49 pm
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Source URL: https://www.stockgumshoe.com/2014/01/annual-review-tarp-warrants/
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One question I have is how do you buy warrant?
I use questrade.com and I reside in Canada.
I am very curious about warrants as I love listening to your ideas and I want to try warrants this time.
But, tickers doesn’t work on my system and I don’t know how warrants work exactly.
Any one experienced with Questrade?
How are the pnc warrants priced vs pnc 2018 call options at the same strike price? What are the implied volatility? Thx
The closest available would be the Jan 2016 call option — two years before warrant expiration — but there is essentially no open interest or volume in those so the pricing is pretty irrelevant. Trading in deep-in-the-money call options is almost always very thin. In about two years we’ll see somewhat comparable options to these warrants available and the time premium will be on its way to slowly eroding.
OK. I ran the PNC warrants through bloomberg’s option pricing calculator. At the current PNC-WT price of $20.77, PNC underlying at $82.27, strike of $67.33, 2.85% dividend yield, and expiry at 12/31/2018, the implied vol on the warrants is 24%. Long term leaps of large financials like BAC, JPM, etc are trading at similar vols. Seems the warrants are fairly valued. Buying the PNC-WT is really just a leveraged directional bet on PNC. IMHO, you’re not really getting anything special here. I think it would be a good deal if the warrants are priced at below market implied vol or premium.