NetNews Usenet Archive 1993 #3/NN_1993_3.iso/spool/misc/invest/16960

Text File | 1993-01-24 | 1.6 KB | 36 lines

Newsgroups: misc.invest
Path: sparky!uunet!gatech!destroyer!ncar!aurora.hao.ucar.edu!pag
From: [e-mail] (Peter Gross)
Subject: Re: Bank of New York Warrants
Message-ID: <[e-mail]>
Sender: [e-mail] (USENET Maintenance)
Organization: Malco Partners
References: <[e-mail]>
Distribution: usa
Date: Sun, 24 Jan 1993 02:57:07 GMT
Lines: 23

In article <[e-mail]> [e-mail] (Gary Rosenberg) writes:
>I need an opinion on the Bank of New York Warrants. These Warrants are now
>selling at a price of $12.00. The warrants expire in 1998, with the right to
>buy the stock at $60.00.  Where do you think the stock will be in 5 years?
>Is this a fair price for the warrants. Any input please

A warrant is essentially a very long term option (sort of a super-LEAP).
The standard Black-Scholes valuations apply to them with one major difference.
Warrants can be "callable" (like bonds).  Regular options have no
comparable condition -- if you are long an option, you cannot be forced to
excercise it.  The callability reduces the value of a warrant, since an
in-the-money warrant can be a proxy for the underlying stock and is a cheaper
way (lower carrying cost) to hold the stock.  In the normal (non-callable)
case the cost-to-carry would be added to the intrinsic value (plus any
volatility premium).  But if it is callable the cost-to-carry has to be
adjusted down to reflect the possibility of forced exercise.

Call the company to find out under what terms, if any, the warrants can be
called.
--
--peter gross
[e-mail]
(303)-447-1374