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Take A LEAP of Faith with Resource LEAPS

To get us started, I have three questions for you.

  • Are you looking for opportunities in the natural resource sector?
  • Do you believe there will be a substantial rally in resource shares?
  • Do you see this rally beginning soon?

If you have answered yes to the above questions, we are on the same page.

Finding the method of investing and uncovering the opportunities is your first challenge.

You may already have your 'special sources' for discovering these opportunities but we all know, don't we, that a company's management is of equal importance as the company's properties.

Incompetent and uncommitted management will surely screw up a good deal and you must make sure that the 'good management' has a significant position in the shares. Verify that management has 'skin in the game', not just options given to them. Ask yourself the question, if I purchase shares in XYZ Resource will I own more shares than management? It is quite possible for this to occur from our findings. We would encourage you to look elsewhere for another company with management meeting your criteria with a serious financial commitment in the shares.

Now that you have found that company or list of companies in which to invest, you may wish to consider some alternatives as opposed to buying the common shares.

There are over 65 resource companies which have LEAPS or options trading on the Chicago Board of Trade, CBOE. Many of these companies are big names in the resource sector and thus allow investors the choice of buying these leveraged opportunities in lieu of the common shares. We have a table of these LEAPS for the convenience of our subscribers.

In addition, there are 75 resource companies which have warrants trading.

Not to overwhelm investors, but these may be some interesting alternatives to investing in the common shares themselves.

If you are new to this idea, you may be asking, why?

Why, would I want to buy a LEAP, option or warrant instead of merely buying the common shares? The simple answer is for the additional leverage (more bang for your investment dollars) and less dollars on the line to control the same amount of shares.

So, briefly let's define, LEAPS, options and warrants.

We group LEAPS and options in the same definition as both of these instruments are 'created' (written) by individuals or investment corporations/funds in search of the additional income in the form of the premiums received.

LEAPS and options give the holder the right, but not the obligation, to acquire the underlying company's shares at a specific price and expiring on a specific date in the future. LEAPS and options trade on the CBOE, Chicago Board of Trade, most with a great selection of exercise prices.

Warrants on the other hand are issued by the underlying company, usually in connection with a financing or initial public offering. Warrants as well give the holders the right, but not the obligation to acquire the underlying company's shares at a specific price and expiring on a specific date. Warrants will trade similar to the company's common shares with a symbol and may be traded on the Canadian exchanges as well as in the United States.

Warrants will usually give the holder a longer life (more time until expiration) with 17 warrants currently with expiration dates of 2015 thru 2017.

Our point here is that investors have many choices of investing in the resource sector, not just purchasing common shares.

The main decision to be made by investors is the company, which company and why. If the company cannot execute on its business plans, no investment vehicle will be a winner.

Of course, a strong rally in the resource sector will be essential as well and this is exactly what we are anticipating, very soon.

We encourage all readers to sign up for our free weekly email and visit our websites to learn about all of our services.

 

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