Are warrants a better/worse choice than regular options? I ask because I dont have the margin requirements nor capital to establish good option trading strategies. So i buy long put and call warrants and trade with the trend. My problem is as follows: say I buy OTM call warrants with delta around 45 and OTM put warrants with delta also around 45. The underlying index spot sits between the strikes of the two warrants. Once the index moves, either the calls or the puts will become ATM and (hopefully) ITM. So my question is, how do I exit the losing side? Im getting raped in these volatile markets where prices are swinging like mad, with no clear daily trend to establish a proper strategy.. could someone help me out?
on occasion there have been messages on warrents. The problem is there is too little interest and that is why your getting screwed. Warrents are NOT a good alternative to options.
Option contracts are created out of thin air (by anybody who meets margin requirements). But, you can't write warrants. They are issued by a financial institutions and trade on stock exchanges.
I am not looking to collect premium for writing options / warrants. I basically am aiming for a method where I profit from intraday swings in a index price by going long both on call and put warrants. Maybe, the fact that investment banks are the market makers who write the warrants - means they will always sell (or buy back) the warrants at a price which is at their favour?
It is VERY difficult to make money consistently with a long-only option/warrant strategy. And if you are long both calls & puts, then you are essentially volatility trading, whether you want to be or not. If volatility increases, then your long options (on one or both sides) MAY increase enough in value to offset the losses from time & adverse movement in the underlying. Warrants and options both share a lot of characteristics with insurance, and what you are doing is a lot like buying both flood and drought insurance, when the climate is usually moderate. If an extreme event happens, you will do well, but it will cost you steadily most of the time. Good Trading! Jessie P.S. and you are right, you will often/usually give up at least a good chunk of the bid/ask spread, whether warrants or options.