Sunday, 21 July 2019

TRADE OF THE WEEK #17 : HSI-C5J (HANG SENG INDEX CALL WARRANT)





Outcome
Gross Profits : RM1,400
Return on Investment (ROI) : 12.9%
Duration : 8 minutes


As part of our Hang Seng series covering successful trades of both call and put warrants - essentially going long or selling short - today's example utilises similar trading principles that we have described  previously.

But there are some nuances we wish to highlight. We will break down this simple trade into its most basic component. From this, you will know exactly what's needed to launch into index warrants trading with maximum profit potential and minimum downside risk.

A bit of an explainer into why we like the Hang Seng Index so much. The Hong Kong benchmark is basically the best proxy for everything that's happening in the world right now. We can take the current headlines in the business newspapers and trade on those angles. HSI warrants - of the call and put variety - are widely available on Bursa Malaysia. They are as liquid as they are volatile, making them the perfect day trading tool.

But of course, volatility usually brings a shitstorm from time to time. Large, sudden moves can kill what was just minutes ago a profitable position. Markets can also move very quickly to absorb any relevant market-moving news, hence your upside potential would be capped.

To counter this, we deliberately decided to trade at the fringes. For example, 99% of the time we only trade a call or put warrant when they are in the red on any particular day. 

The trades are simply the purest representation of contrarianism; we trade in expectation of a bounceback. If the warrant goes from red to breakeven, we're already profitable. If it moves into green territory? Bonus profits.

But to undertake such a foolhardy endeavour, you must be very discerning about your trading choices. Be a chooser or you'll end up a beggar.

In order to determine whether an index warrant trade is in fact tradeable, we created a stringent set of filters. These are important in order to avoid blind speculative trading. Every approach must be grounded in logic.

CHOOSING THE WARRANT


To make your life easier, here's what we recommend:

1) Pick a cheap and liquid (high volume) call warrant. Then pick a put warrant with the same traits. We define cheap as anywhere between 20-35 sen. (Editor's Note : It's really up to you. This is the range we are comfortable with)
2) Keep those two warrants in your watchlist. Their movements are an indication of how the index is performing. Don't trade if the warrants move irrationally (for example, if both call and put warrants are both in the red for some reason. It doesn't make sense).
3) Take note of potential market moving events. In the HSI's case, it's typically news relating to global markets (trade war, US Fed interest rates) and China (economic numbers).

4) Most importantly, watch for overreactions in the warrants. This is where prices move too fast as a result of some new, super positive or negative piece of news. This is also where you can start thinking about trading.

THE TRADE
On 15 July 2019, the news in question was this:

That's right; Chinese GDP figures. The reaction on Monday was swift and brutal; the Hang Seng dropped precipitously at the open. 

At the time, these were our call and put warrant pairs:


They are good options as both were trading at around the 15-30 sen range. Note that the 'C' is how call warrants are denoted, as is 'H' for put warrants. They are also very liquid.

Our personal filter for trading these are quite extreme. We'd only consider trading them if the price had dropped by 20% or more. As you may realise, the resultant market drop from the Chinese GDP figure brought death and destruction to the value of HSI-C5P, our call warrant pick. At its lowest point on this day, the call warrant fell by 22%.

Now, it is important to ask two questions.

1) Now that the market has absorbed the impact of this news, will there be a rebound?

2) What is really the best warrant to trade?

Addressing (1) is where news analysis comes in. Nobody can teach you this but yourself.

Essentially, this skill is about determining how certain news event affects stocks or warrant prices. They are always relative comparisons; News Type A would usually cause this stock to drop X %, or News Type B would cause the stock to drop X%, before rebounding.

Understand that the China GDP news is not really shocking; it was in fact widely predicted. Yet the market impact was real. This is where we had to draw the line and trust in our judgment.

We believed that an expected negative news (China GDP slowdown) would cause a brief shock before a rebound.

Only truly bad news would cause markets to stay down with no rebound in sight : for example, a sudden halving in China GDP growth, or even worse, a negative GDP figure (doomsday scenario).

In other words, if you were to create a ranking system of bad news, with 1 = not too shabby and 10 = we're all screwed, this China GDP development would probably be a 4. Yet the market reaction was really strong! This was when we smelled opportunity.

Now that we are all buttered up and ready to trade, let's look at (2). Sure, HSI-C5P is in our watchlist, but is it the best call warrant to trade?

In a word : no. The honour belongs to HSI-C5J, which is even cheaper. But of course that brings its own set of risks.

HSI-C5J is simply the supercharged version of HSI-C5P. It is close to expiry, and when warrants get to this point, they become more volatile. A cheap, close-to-expiration call warrant reacts the strongest to market moving developments such as this China GDP thing. Hence, this call warrant's intraday low was a massive 40%, or a drop from 19 sen to 11.5 sen in a day.

The call warrant is not hard to miss - it was the top traded Hang Seng call warrant on that day, with tens of millions of them traded. We certainly didn't miss the opportunity to go in at a 40% discount. It only has to go up slightly for us to make four-figure profits. This we like. 

To go back to HSI-C5P, the warrant remains good, but it simply offered less upside, and was pricier. Relative to the amount of risk we were committing to take, we preferred the supercharged option.

And now for the last part : we needed validation that a rebound was actually happening. You can simply look at real time prices for the Hang Seng Index on Google Finance to see this. But the associated call warrant needs to appropriately reflect the rebound. 

For this part, we chose to wait until HSI-C5J gets off its lows on its own. Trading was very volatile so there was no such thing as the right volume or liquidity. The warrant simply has to rise in price - this is the final validation for us to get in. 

As a side note : know that we could be totally right about all the other things we mentioned here, but if the warrant doesn't recover in price, there is really nothing to trade. If the price doesn't prove how right you are, the trade is a wrong one to make.

Like Rocky Balboa in the 10th round, HSI-C5J got itself up. It quickly rebounded to 14 sen, prompting us to put in our first buy order. Our uneducated guess is for the rebound to hit at least 18 sen (Editor's Note : as usual, we were counting on a 10% profit target or more; it's the only reason this trade is worth doing).

Actually, we couldn't get in - the price movement was too fast. At 14.5 sen? Same thing.

Shockingly, we only got in at 15.5 sen. You may think that's terrible, but we think it was a good thing. In our mind the swiftness of the rebound exceeded our own expectations. This 'upside volatility' is what we live for, and we stood a chance of making great profits in a very small amount of time. 

As it happened, we conservatively exited at 17.5 sen. We should have stuck around; the warrant eventually hit 20 sen but that's OK. Remember that our profit target was met: at 10% yield, we don't care about the residuals. It was time to exit.

And for a trade lasting all of eight minutes? We'll take that.



Tuesday, 16 July 2019

TRADE OF THE WEEK #16 : HOMERITZ CORP BHD (WARRANT B)

Outcome
Gross Profits : RM9,143
Return on Investment (ROI) : 36%
Duration : 24 hours


What do we know about the furniture industry? Not much. 

Did we plan to trade furniture stocks two months ago? Definitely not. 

Were we aware of HOMERIZ as a value proposition? Sure, it's good - relative to other furniture companies on Bursa Malaysia.

Were we aware of the inherent value of HOMERIZ's two newly issued warrants when they were listed on 9 July 2019? Not really.

Did we get into one of the HOMERIZ warrants at a good price and made great profits? Absolutely.

So can you trade something without knowing much at all about the company? The safe answer is : sure, but your reasoning has to be damn solid. 

As traders, we have to be able to look outward and inward. For HOMERIZ, we had an inverted view of how the warrant behaves. Rather than looking at fair value (this is public knowledge, as far as we can tell) or even the fundamental prospects of the company (which we also do, but with a different trading approach), this time our primary focus is on our bread-and-butter skillset : price and volume analysis. 

This is what you get when you pair an abnormal range for a stock price to move with abnormal volume activity (shares/warrants bought and sold) : volatility.

Here's a tip : always look for 'good' volatility. This is where you can feasibly enter a warrant at an enormously appealing price point. 'Good' means that the volatility that brought the warrant price down can just as easily drive it upwards. You think you understand volatility? Good.

What you do with that understanding is this : find a price point where you are convinced that the profit opportunities from that 'good volatility' far exceeds your downside. In theory, your downside risk is lessened when the stock has already fallen steeply, providing you with a trade that has a very good reward-to-risk ratio. 

We are adept at doing this; we are in fact quite OK at it. This meant that we can identify a good opportunity and commit to it by looking at the warrant and how it is moving. It sounds simple, but it's not. 

It may be the case that HOMERIZ warrants (one of them) are undervalued if the company's fundamentals and the warrant's conversion price are taken into account. But these factors do not always move markets. Good warrants can stay down, and terribly overpriced warrants can suddenly gain more.

You may find these concepts quite dry. Perhaps our real life application of them is more entertaining. This skill is very valuable to learn; it yielded us close to RM10,000 within 24 hours, after all.

THE TRADE

On 9 July, we noticed that HOMERIZ-WB opened at a steep premium of 20.5 sen. This rally did not seem to have legs. The warrant did nothing much but decline steadily for the rest of the morning.

You may ask: "OK, so how now?". Believe us, we were like that as well. We kept watching the warrant as it goes through the motions. It was clear from our observation of price and volume that the equilibrium is not there.

This EQUILIBRIUM is the point where buying demand equals selling demand. This is important as when it comes to newly listed company warrants, you have to understand the buyer's and seller's motivations.

Buyer's motivation is simple : the warrant does in fact seem inherently undervalued compared to where the stock is trading. You probably know this or at least know where to look for details on this. We're not going to elaborate on this here.

Seller's motivation is even simpler : the quick bump and warrant opening at that steep price (above 20 sen) is a strong incentive to take quick profits. For existing HOMERIZ shareholders, these free warrants are expendable; selling them means easy money. Hard to argue with that from a short term perspective.

We know about these motivations, but they aren't our motivations. No sir.

We are only motivated to trade this when our criteria are met. One of them is the aforementioned equilibrium.

How to see it? That is the point where the previously volatile warrant stabilises - it did fall from 20.5 sen to 12.5 sen in half a day, after all - and where it finds solid buying volume. It is essentially the bottom, where you might say there is nowhere for the warrant to go but up.

The better you are at identifying equilibrium, the better your price point is, assuming you're not the fat whale / millionaire uncle who created the bottom by buying an tens of millions of HOMERIZ warrants (Editor's Note : if you are in fact the whale, please drop us a line. We have a few projects you might be interested in...).

We are further comforted by other favourable factors. Remember that these have nothing to do with the company fundamentals. It is purely the characteristics of the trading instrument, in this case the warrant.

1) The inherent undervaluation of warrant B, based on its conversion price and HOMERIZ stock price presently.

2) The relatively low amount of warrants issued : 75 million. Total turnover from the first day easily exceeds total warrants issued. Which means somebody is churning.

Apart from this, our final confirmation that the warrant can reach the skies (just like our all time favourite stock pick) is our special sauce. It's not easy to explain; in fact, we dare say that it's an intuitive trait that comes with both practice and experience.

The sauce is this : the liquidity in the warrant must be exactly appropriate for it to go up. Not too high (which means the sheer selling volume will dampen the upside prospects) and not too low (which makes the warrant illiquid, making it more volatile and making it difficult to sell our positions).

What defines 'exactly appropriate' can differ. We're generally OK if the stock has a buy and sell orders of nearly equal amounts (let's say :2,000 lots buy VS 2,000 lots sell).

In HOMERIZ-WB's case, the level turned out to be closer to 10,000 lots for buy and sell orders. The appropriate-ness was proven by the warrant's trading activity prior to us entering.

Yes, we are also careful, not to mention typical worrywarts. We don't care about catching absolute bottom prices; it is preferable to confirm the momentum first.

That upwards momentum is confirmed when you have discovered the equilibrium (A) and the appropriate liquidity (B).

As (A) and (B) make themselves apparent, you should have (C) : upwards momentum. In other words, a price rise.

So this is how we approached HOMERIZ-WB exactly:

  Notice the "WE BOUGHT HERE!!!" part.

We even had a little tweet a bit later to commemorate that entry point. This was when we were convinced there is upwards momentum.
For the record, the intraday low on that day was 12.5 sen. We bought into HOMERIZ-WB starting at the 14-14.5 sen range, a premium of 12 % off the lows, but still at a discount of 30% from the warrant's opening price.

Between 12.5 sen and 14 sen - less than an hour - a few things became apparent to us:

1) Equilibrium was achieved at the 12.5 to 13 sen range, it seemed. Total turnover at this level was massive: more than 12 million warrants transacted. The selling looks to be exhausted faster than the available buy orders.

2) We witnessed 10,000 lots (a million warrants) cleared easily at 13 and 13.5 sen - that kind of liquidity was we deemed to be appropriate.

3) Of course, upside momentum is already confirmed.

Now for the fun part: we bought into the warrant with maximum conviction. There is no more deliberation or worrywartness to deal with. After buying an okay-ish position of 1,700 lots, all that's left to do is to manage the downside and look forward to the upside.

Based from experience, we knew that the potential for a large move upwards is likely to happen within the day. Newly listed warrants tend to do this (Editor's Note : we target them the way we target IPOs).

As you can see in the chart, by 3:45PM it's a moot point already. We can sit back and relax abit. This is because we are aware of this next bit about investor psychology.

Aaaahhhhh....

Recall that the warrant opened the day at 20.5 sen. It collapsed to 12.5 sen right after, no doubt bringing down a lot of early punters with it. The dumping accelerated, then stopped.

This being a cyclical move, by 3:45PM it became apparent that a strong rebound is happening. From 12.5 sen, the warrant quite quickly hit 16 sen. That's a 28% gain.

You don't have to take our word for it, but we knew that the goalposts have shifted. The real money is made within that range from 16 sen to 20.5 sen. In other words, your punter uncles and their cohorts would now be fully confident of this warrant hitting 20.5 sen again. The circle of life.

Thematically, you can look at it as the 'greedy phase', which came right after the 'fear phase' was fully consummated.

We are of course on this same boat towards the upside, but we highlighted this phase as it helps set our exit points. We decided to hold on for the ride and hold on until 20 sen, by which time we would sell.

There are some basic set of expectations that would (usually) confirm our theory on the warrant rally continuing:

1) That same greed will bring an influx of new buying volumes from 16 sen onwards.

2) There may be crazy volatility, but if the warrant closes at a point that is far higher than 16 sen by the end of the day, a brief rally the next day is a strong possibility. Yes, we target these brief rallies as a selling point. Notice that we sold at the top on 10 July? (Editor's Note : the rally resumed on 11 July but that's a different story...)

Why basic? Because if what we anticipate comes true, it will happen exactly the way it think it would. And it did!

Anyway:


What you see here is the potency of the idea. As a trading strategy, it's worth exactly this much.










Tuesday, 9 July 2019

PENTAMASTER IS HEADING FOR THE SKIES : BURSA MALAYSIA STOCK ANALYSIS

We, for one, look forward to the robotic, automated apocalypse

We are short term traders, but usually we are willing to bend over to the buy-and-holds of this world. In the background, away from the flashy trades and easy money (not really), we are still first and foremost students of fundamental analysis. Stocks that go up and stay up are backed by good fundamentals; there is no denying this, ever.

Other stocks with more hype than substance will go parabolic: that is, they will go from 50 sen to RM1 before returning to 50 sen. Hype is sentiment, so of course the stock goes up. Yet sentiment is finite; once it is exhausted, the stock price will simply normalise as punters dump their positions. 

But substance AND hype? That's a powerful combo... it's a theme we will delve into with Pentamaster Corp Bhd, our favorite long term pick. Let's say for at least six months and beyond. 

We will make an investment and trading case for Pentamaster as something you can hold for a while. Our thesis is this: the fundamental prospects are intact, as shown by earnings growth. But the stock has transformed itself to turn this into an even more appealing investment opportunity.
 
THE BACKGROUND

We have been lustily gazing at Pentamaster since our voices broke. This goes back at least two years, when the company demonstrated its capabilities to grow its revenue exponentially. By now, it has all the plaudits : it's already among Forbes' top performing companies in Asia.

Two years ago, the stock is about half the price it is trading at now.

 Weekly chart for PENTA, July 2017 to July 2019

 
Back then, due to its steep price (prior to the price adjustment, Pentamaster was trading at near to the RM4 mark, on very low volume) and lack of liquidity, there was simply no way to hold a meaningful position. What we mean by that is; there is no way to optimise returns relative the the amount of capital we have. We would have preferred the stock to have an associated call warrant or three, enabling us to put on a large enough position and realistically target four-to-five figure profits. 

Fast forward to July 2019 and suddenly : PENTA now has call warrants.

 More details on their technical characteristics here.

Fun fact: call warrants are typically issued by investment banks based on several factors: price stability, positive historical performance, and a few others. But the key consideration is market capitalisation : the company needs to have a market cap of at least RM1 billion and above for a certain amount of time for it to be considered warrant-worthy. This criterion reflects the stability of the stock, interest in the stock, and its not-so-bad historical volatility (it doesn't go parabolic, so to speak). In other words, nobody issues call warrants to shitty companies (Editor's Note : this is up for debate).

Being the weirdos that we are, we have always tracked these things. The 'graduation' of a small cap company into a RM1 billion market cap stock indicates many, many positive things. Longevity. Real earnings growth. Long term upside trajectory (for earnings and stock price). Resilience against negative market conditions. Management acumen. Growing cash flows and ideally low borrowings. PENTA has all this and more. 


THE INSTITUTIONAL FACTOR

We know that PENTA is a great small-to-mid cap stock. But this is what will really drive the stock to the heavens: its investability.

Let's go back to the price adjustment: the company undertook a one-for-two bonus issue in a bid to improve liquidity and 'reward shareholders with more shares while not incurring dilution' (commonspeak : we make the stock cheaper so you can buy more of it). Given its status as a small cap champion, it's natural for institutional investors to look into it. By this we mean the PNBs, EPFs, KWAPs, mutual funds, and hedge funds of this world.

Note the fragmented nature of shareholdings by funds according to PENTA's latest annual report. Previously funds can barely get a position going. Aside from the guy who owns the company and three funds, everybody else in the top 30 hold less than a 2% stake.


Institutions can't really come in before in huge numbers because the stock is simply too illiquid. It was very hard to accumulate a position worth RM50 million, for example. No avenue is available to buy that many shares in the open market; a private transaction would be also a risk, precisely because of the lack of liquidity in the stock.

In other words, institutions prefer a good stock that is easy to buy and sell. Yields are narrowing in the blue chips segment; for those with the right mandate (or the freedom to buy whatever the hell they want), they should also be lustily gazing towards a strong growth counter like PENTA.

 From the annual report.

And growth is all the upside potential: PENTA does not pay dividends, and will likely not do so until Najib becomes PM again. This is understandable: the company is conserving cash for an expansion, a noble goal that in itself is an appealing prospect for the long term investor. 

In fact, the company is so fiscally responsible that they are fully in a net cash position. Profits are fully reinvested.

Think about it this way: the major shareholder, who runs the company, believes in his company so much that he does not take the easy approach of declaring fat dividends as a cash reward to himself and shareholders. This is Marvel Cinematic Universe levels of heroism here.


 *not an actual photo of PENTA's management. Source.
The message is clear: Pentamaster is a capital appreciation play, and if you're in, you're in it for the stock to potentially gain 30%, 50% or 100%  in value. No BS,  and no get-rich-quick crowds are welcome.

The timing to consider the new call warrants is impeccable, as evidenced by the following developments:


2) PENTA-CA and PENTA-CB becomes available to trade from 28 June 2019.

3) On 2 July 2019, Pentamaster stock hits RM3, and a new all time high.

4) It looks as if it's revving up for a rally (but really, don't just take our word for it. As of 8 July, it's still trading at an all time high of RM3.14 (Editor's Note : this post came out on 9 July. Any guesses to where the stock is now?).


THE STANDBY TRADE : A SIMPLE APPROACH

All these boil down to a simple trading thesis. Our parameters are so simplistic that even a monkey can understand it.

We feel this trade is better represented with the call warrants. 

1) Pick a range to trade. Avoid exposure to the volatility. Mitigate downside risk and optimise the position to profit greatly on the upside.

Let's say the call warrant is trading below 20 sen. When the warrant hits 20 sen, you already have created a profit buffer. For example, a purchase at 18.5 sen per warrant means you already have a 5% yield and a 1.5 sen per warrant profit once it hits 20 sen (Editor's Note : given that the warrant values have gone up, this is still applicable at above the 20 sen mark, provided you have set aside a reasonable profit buffer).

The expectation is for the warrant to never hit below 20 sen again. This means you can sit and relax. If you're a market timer, let's say the next important date to look out for is Pentamaster's next quarterly earnings announcement - that's about a month and a half away, and it's expected to be good. 

2) Downside mitigation. 

Pick a price you'd be willing to accept losses. If a trade is done at 18.5 sen, we'd be willing to exit at 17-17.5 sen. The maximum downside is 8%, but given that you're trading leveraged call warrants, let's just say your loss potential can be multiples of that.

You must accept potential losses before committing to an exit point.

Similarly, you decision to exit should also be based on the mother share's current trajectory. Let's say that another dumb Donald Trump announcement causes tech stocks to crater. There is no doubt that stocks like Pentamaster or INARI will go down fast; they are the sector leaders after all. In your mind, set a loss threshold for the mother share itself. From its current price of RM3, let's say your forced exit point is RM2.85 (Editor's Note : indeed, we started writing this post when the stock was at the RM2.95-RM3 range. Since then, it's already up by 13%).

Without over-complicating things, you would exit your call warrant position (bought at 18.5 sen) if either the warrant hits 17 sen, or if the mother share drops to RM2.85, whichever comes first. Obviously the stock determines where the warrant goes; what really matters is you're picking your own exit point.

To put it another way : who the hell rides a bus without picking his/her stops? 

3) Exit when downside range is hit; re-enter when necessary.

The last step in the execution stage is simply that. Sell your holdings if the warrant falls below your downside range. But try to buy and accumulate the position when the warrant shows signs of recovering. As it is tracking the PENTA stock price closely, you can reasonably use the warrant as a gauge for the mother share. 


Hard to look at the charts without  feeling aroused.
THE ILLIQUIDITY PRINCIPLE 

Despite all this talk about improving liquidity, we'd like to highlight one thing: the stock still isn't all that liquid. This is both good and bad; let's focus on the good part first.

We have stated before that the key to riches is to focus on illiquid mid-to-large cap counters with a solid growth story, strong earnings growth to reflect said growth story, and (crucially) some tradeable cheap call warrants.

Illiquidity means the stock can easily go up by 20 sen in a day if there's a good catalyst. Your downside is protected by the company's continuing growth story. As long as you have this, there will be reasonable support in the share price to a certain extent. 

We particularly love expensive stocks that are trading at RM3 or more, simply because there usually aren't that many shares available to trade. Any positive news and the reaction will be outsized

With the right call warrant trade, you're buying into a cheap position that is linked to an expensive stock. The stock is presumably expensive because it's got a strong earnings record. Your cheap call warrant position will become considerably less cheap the further the mother share goes up. And because of illiquidity, the mother share can go up fast.

The downside of illiquidity is simple: during bad times for the market or sector, the stock may see near zero trading interest. This means it's definitely not for the contra / t+2 punters of this world. Any commitment must be of the buy-and-hold variety.

BUY IN AND STAY INVESTED

We get it; many of you are probably the trigger happy types, eager to chase the next trending stock when the opportunity arises. 

However, from time to time you may be better served by switching your strategy. To do this you'll have to get rid of the trading mindset, but retain the profit mindset.

It's hard for us too; we target hot IPOs to trade all the time, sometimes ridiculously successfully. But the priority of profits take precedence over what we like or dislike. The desired outcome from any investment/trade idea should be profit maximisation, not how much fun you'd have trading things (if that's your real priority, go here).

EXIT THE MARKET AT YOUR OWN TERMS

Of course, the trade has many pitfalls But assuming marginally improving earnings over the next few quarters, your risks are mainly three types : losses arising from opportunity cost, external factors, and technicals.

Opportunity cost here is simply defined (by us) as potential opportunities/trades you could have gone into but didn't because of the need to hold a long term position.

This must be considered at your own discretion : if you think you can make RM30,000 in profits by trading in and out over the next 2 months, compared to making RM25,000 from a buy-and-hold call warrant position, go for it (Editor's Note : most of us will end up with a -RM15,000  loss if we actually do that).

External factors are simple : Trump. Trade war. Fed rates. Jittery global investors. Geopolitical shocks. Back to Trump. Repeat. Also include broader KLCI conditions and sector newsflow.

Technicals : a stock like PENTA is currently at all time highs. There's a good reason for that, but there may be equally good reasons for it to start going down. Our remedy for this is simple: there will always be enough time to exit at a small loss if the stock reverses its course and invalidates our entire thesis. We don't recommend doing the buy-and-hold approach and carrying it into negative equity: it's suicide.

NOW GO DO WHATEVER YOU WANT

This was never meant as an inducement, or enticement, to acquire PENTA call warrants, or PENTA stock. The principles described here can be applied to any similar situations where a good, pricey counter comes along with a good, cheap call warrant.

When you find those - and we have found many such opportunities - try to stick with them. It's worthwhile.




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