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Dudley Baker

Dudley Baker

Dudley Pierce Baker is the founder and editor of Common Stock Warrants and its predecessor, Precious Metals Warrants and a 1967 graduate of St. Mary’s…

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Afraid of Stock Warrants - Try this Approach

Precious Metals markets are on fire and investors are looking for ways to invest in this sector.

But, every investor has their own comfort zone - their own level of risk, if you will.

Some will be very aggressive in their market views while others will remain more cautious.

Most have tried options, but LEAPS or warrants, probably not.

Is there a way to please all investors by purchasing some warrants on one or more of your favorite natural resource stocks? Let's See.

Our writing here is not intended to educate investors on all aspects of warrants and we encourage you to visit our Learning Center for more information.

Briefly, a warrant is a security giving you, the holder, the right, but not the obligation, to purchase the underlying security at a specific price and expiring on a specific date in the future.

And why should you be interested in warrants? Simply put, leverage: more bang for your investment dollar. The additional leverage should be at least twice that of the underlying security giving you a substantial reason to consider using warrants.

There are currently over 100 warrants trading on natural resource companies and 40 of those warrants have remaining lives of over 2 years, a few with over 4 years of remaining life, thus giving investors a long time to play this bull market without the fear of short term market fluctuations.

How much to put in warrants?
We would suggest the average investor allocate no more than 10% of their resource based portfolio in warrants.

Using the scale below, on the left side is the Conservative Investor saying, no way; I don't want any leverage, options, LEAPS, warrants, nothing but gold, silver or the common shares on the resource companies.

We're not here to argue with you, so fine. You will do well if you pick the right companies.

But if you are an Aggressive Investor or somewhere in the middle let us present you another investment approach for your consideration.

Let's assume you have $100,000 which you are allocating to the natural resource sector. Now let's take 10% ($10,000) as a potential investment in companies with warrants trading.

You can easily adjust the amount of leverage (purchasing warrants) by performing a dollar allocation to the common shares versus the warrants.

If you are Very Aggressive and like one or more of the companies with long-term warrants then you may want to invest 100% into the warrants.

If you are say, 60% Aggressive, then allocate 60% to warrants and the remaining 40% to the purchase of the common shares.

Slightly Aggressive, say 40%, then allocate 40% to warrants and the remaining 60% to the purchase of the common shares.

We think you get the picture. You control the amount of the leverage with warrants depending on your own investment preference and level of risk you wish to assume.

The end result will be a much larger potential gain in your portfolio depending on the level of risk you are willing to assume. Of course, we need this bull market to continue and the shares of the specific company to perform well to accomplish the maximum objective.

 


For those readers unfamiliar with our services:

PreciousMetalsWarrants.com provides:
1. An online database for all warrants trading on the natural resource companies in the United States and Canada. Our database is the most comprehensive database that you will find.
2. "A Look Over My Shoulder" - This is my entire personal portfolio and I provide an audio update each Thursday evening and emails as I buy or sell securities or warrants. Each subscriber can decide whether to follow me but this is your decision and we suggest that subscribers do their own due diligence before buying any securities.
3. Insiders Trading Data:
We track the insider trading on the Canadian Securities and issue BUY and SELL Alerts as we deem necessary. We have a great track record of approximately 115% gains on all closed trades.

We encourage all readers to sign up for our free weekly email.

 

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