re: Warrant Traders beware ... greyhound
Hi Greyhound,
I have heard many sad stories by Traders concerning MM manipulation ... and accordingly the Warrant Market just keeps losing players because of it ...
The ASX twiddle their thumbs ... mind you the Issuer's are investment Banks who probably are shareholders in the ASX but that would be too cynical of me to suggest any conflict ...
Most Traders don't know that I/Volatility quotes are the mathematical product of the Bid/Ask quotes ... not some mysterious entity operating in ways that influences the Warrant Market to explain what are seemingly 'unfortunate results' for disappointed Traders ...
It is the other way around as I have tried to show ...
I/Vol is a mathematical calculation that incorporates all BSOPM inputs including time decay ...
The Issuer's (MM) are pro-active and drive the Warrant Market and the I/Vol quotes are the effect not the cause ...
If I can find the time ... I may construct a spreadsheet for derivative traders which will crunch I/Vol on a daily basis so traders can be alerted to what I call 'claw-back' and trigger an EXIT warning ...
I have considered this question and am of the opinion that any evidence of MM I/Vol 'claw-back' can only be salvaged by exiting from the position fast...
Warrant Traders are caught in the trap because they are in on the positive TREND (Long or Short) and think the underlying movement will save the position ... this may or may not happen.
The example above demonstrates a positive movement failed to even cover costs which will be largely written-off let alone any profit.
Further, as derivatives traders 'shop' for VALUE I/Vol quotes at ENTRY ... don't think you are immune ... I/Vols can be surreptitiously ramped quickly leading to complacency ... translates into expensive with negative underlying movements and cheap on positive movements... this scam is a two-edged sword.
Again, Issuer's(MM) are pro-active in this process not reacting to any Market force or other ...
No doubt Warrant Traders are unhappy and many are deserting ... there is renewed interest in ETO's and with the promise of STP ... Warrants will be dead in time.
You mention CMC ... another product dissolusioned Warrant Traders will view for the reasons you mention ... noted you mentioned specifically what I consider CONFIDENCE issues ...
Too bad the ASX condone what is becoming simply corruption ... it doesn't have to be as Warrants have everything going for it and should be booming ... we all know it is dying and why ...
