tag:blogger.com,1999:blog-18183714.post5598944920900230650..comments2024-03-08T20:25:35.963+08:00Comments on Malaysia-Finance Blogspot: SalvadorDalihttp://www.blogger.com/profile/06868577716920232901noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-18183714.post-17915756925860222102008-01-31T10:38:00.000+08:002008-01-31T10:38:00.000+08:00tony,you are right, they are the dealer and shall ...tony,<BR/><BR/>you are right, they are the dealer and shall have the house's edge in the end. for heavily traded warrant, it is also right to say that MM will find it harder to play tricks as the high volume explains the efficiency to a certain extent. thinly traded warrants usually are out of favour due to their unattractive spread or pricing.<BR/><BR/>dali,<BR/>i think when houses are not traded against one another, they lower their guards, resulting in more mis-pricing and offer opportunity for arbitrage. sometimes, i do observe, if i read correctly, MM will retort to unscrupulous act to force proprietary traders when they detected sign of activities. poor retailer like me will be the victim of their fight.<BR/><BR/>as for now, there is still plenty of good opportunity to trade warrant. am still learning more.bantersyhttps://www.blogger.com/profile/11951996770209899435noreply@blogger.comtag:blogger.com,1999:blog-18183714.post-52420152287178654442008-01-30T23:28:00.000+08:002008-01-30T23:28:00.000+08:00first of all, general, i don't know if you are say...first of all, general, i don't know if you are saying its a good article, or its a bad article... tongue in cheek usually means the reverse... if you did not like it, at least say why you did not like it so I may improve..<BR/><BR/>bantersy,<BR/>market makers get the rough dig all the time, they are there to make money, not to act like a saint... the prob we have here is that other houses / market makers are not yet trading in each other's warrants like they do in HK in a big way... thats why its very hard for a market maker to play tricks in HK, somebody will kill their positions.. bursa and sc are still learning the ropes... I hope they hire me in some capacity (lol)... but you know betterSalvadorDalihttps://www.blogger.com/profile/06868577716920232901noreply@blogger.comtag:blogger.com,1999:blog-18183714.post-78046489565150569392008-01-30T22:22:00.000+08:002008-01-30T22:22:00.000+08:00Very good article. (Tougue in cheek) The time now ...Very good article. (Tougue in cheek) The time now is 10.22pm on 30Jan2008Dragonflyhttps://www.blogger.com/profile/06002813529177196606noreply@blogger.comtag:blogger.com,1999:blog-18183714.post-33029353274364130392008-01-30T18:07:00.000+08:002008-01-30T18:07:00.000+08:00Warrant trading is like playing Baccarat. You see ...Warrant trading is like playing Baccarat. You see a long trend of banker bets and you decide its player's turn and vice versa. I think the house edge (brokerage) will kick in, in the long run. In heavily traded warrants I find it difficult to spot any mis-pricing. But then again, a warrant is an option to buy or sell into the future, so what is fair value? Optimism or pessimism waxes and wanes with each market day., so premiums follow.Unknownhttps://www.blogger.com/profile/03689432601843975670noreply@blogger.comtag:blogger.com,1999:blog-18183714.post-65871622247742505402008-01-30T11:46:00.000+08:002008-01-30T11:46:00.000+08:00Dali,Sincere thanks for taking the time to reply e...Dali,<BR/><BR/>Sincere thanks for taking the time to reply especially at wee hours. Haa...<BR/><BR/>These days, I noted the wild swing in the pricing as for example, in a volatile day where the price of underlying swing (+/-)5%, the warrant is priced in extreme end for put and call. Say if you buy the put warrant at 20c today when the underlying is $18(intra $1 swing), at the next day, the underlying increases in price to say $18.40, the put can actually went up in price - moving in tandem with the call as well. This is crazy. Either the mispricing during the wild swing or at a calmer market day, market maker is pricing the warrant at a higher premium to force people to buy at that price should they want to. On the third day, it actually swapped down the price again to 18-19c when the underlying again, resume their fall back to say $18. <BR/><BR/>What I want to highlight is market market, most of the time is the issuers themselves, are doing a lot of mispricing with regulator allowing them to retort to such "bully" behavior. This is a real experience I had few weeks ago. Market maker was happily throwing down 6 million of warrant to the buy queue. Guess what, the underlying is still going up. The next moment, it swapped the bid/offer down by 1 bid. A obvious case of "eating" the retailers/institutional players. <BR/><BR/>Without proper governing on the pricing mechanism, this type of scam is a misfortunate and warrant participants have to factor such element in their warrant equation, or what Benjamin Graham said, margin of safety.<BR/><BR/>Dali, you talked about grave mispricing. But there is one variable inside the schole equation or what you had posted way earlier on warrant's equation, that MM can always use that to swing the bid/offer in their favor. Eg. which you already know widen the spread. <BR/><BR/>Well, you may say that such mispricing is temporary and stretching it into days, the correct pricing will be reverted.<BR/><BR/>Any thoughts?bantersyhttps://www.blogger.com/profile/11951996770209899435noreply@blogger.com