Is L&G-LA Warrant In the Money?

Posted by Kris | Thursday, May 29, 2014 | | 0 comments »

Land General
I just did a mistake today as I was busy and caught up in the euphoria as this is one of my watchlists. I thought that at RM0.43 , the L&G-LA is in the money as the mother share L&G is trading at 0.570. The strike price is RM0.13 at 1:1.

Hence I thought that it is in the money by RM0.01 because RM0.570 (mother share) - RM0.430 (warrant) - RM0.13 (strike price) = RM0.01.

Only EOD, i just noticed that on 28 May , L&G just announced a dividend of RM0.02. That could explain the huge volume and also made me realized that I am going to make a loss on this trade.

Why it is quite simple: With the dividend baked in, the real value of the L&G-LA warrant to be EXACTLY in-the-money would be :

RM0.570 (mother share) - RM0.02 (warrant) - RM0.13 (strike price) = RM0.42 (theoritical EXACTLY in-the-money L&G-LA warrant).

So I am sitting on a paper loss of RM0.01 on this trade at the end of the day when the euphoria amidst high volume died down and the crowd became sane again. Nevertheless, the highest of volume was transacted at RM0.43 .