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The Magic of Leverage - Mining Warrants

Are you excited? Excited about what you ask?

Well first of all, we are currently in the midst of a great move in the price of gold and silver bullion with much more to come based on the views of many of the top analysts. And it sure appears the recent 'correction' (shallow that it was) is over and it is up, up and away time.

Hopefully, investors are onboard and benefiting from these wonderful times.

The question is how are you as an investor positioning yourself to capture the maximum profit in the markets? You could be buying gold or silver bullion, selected mutual fund shares, or common shares of the precious metals companies. Another consideration that many times is over looked due to the lack of knowledge of investors and their investment advisors is warrants. Frankly, the warrants on many of the mining shares are exploding.

Everyone likes to look at charts so here a few of Gold (6 month chart) and the XAU (Gold & Silver Index) and the HUI (Gold Bugs Index - AMEX) both charts are thru today's close on April 3rd.

Of course, we observe from both of the above charts that the stocks are lagging the gold and silver bullion which are hitting new highs.

Even though the indexes are lagging, many of the stocks within the indexes and many others are making incredible moves. I am so excited as to where we are and our potential rewards as investors that it is sometimes difficult to sleep at night. But some of the most incredible moves have been in the warrants on some of the mining shares. Typically, the warrants will move at a 2:1 leverage over the shares.

We currently have no chart or the current statistics available to share with you but our personal observations are nothing short of fabulous.

As we investors position ourselves, we should be considering getting the greatest bang for our buck. In other words, using the most leverage possible and to us leverage means getting the maximum return with the least amount of your investment capital at risk. This can be accomplished by purchasing a basket of long-term warrants on some of your favorite mining shares.

Briefly, a warrant (which trades similar to the underlying stock) gives the holder the right, but not the obligation to acquire the common stock at a specific exercise price and expiring on a specific date in the future. Currently there are many warrants with expiration dates from 2009 to 2011, giving the investor many years to play this bull market without having to be concerned about the short-term trading swings in the market. The message here is; do your homework, take a position, sit back, relax and enjoy the ride of our lifetime. For more reference, we refer you to our previous articles, 'Why Warrants - Why Now!' and 'Why Warrants - Why Now (Part 2)'.

So, we ask again, are you excited? Not yet? No problemo, (as we say in Mexico), but one day you will be. The choice is yours: now or later.

 

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