BAC-WT - Bank of America Warrants

[luck]

yes.  congrats ericopoly and so many others on bac warrants!  i'm long the common.  was hoping to buy some warrants, but i guess i need to make sure i better understand pricing, anti-dilution, etc.  anyone have any book recommendations or website recommendations on learning more about warrants, options/leaps, rights, etc?

[west]

Does anyone know why the underlying went up so much today?  I understand that it may just be sentiment changing, but it seems a little odd for sentiment change to come out of the blue, on one day, like this.

[ECCO]

Does anyone know why the underlying went up so much today?  I understand that it may just be sentiment changing, but it seems a little odd for sentiment change to come out of the blue, on one day, like this.

 

Its been 10 days that the stock was flirting with 10$ but was not able to do it. Too much pressure...explosion today.

[rkbabang]

yes.  congrats ericopoly and so many others on bac warrants!  i'm long the common.  was hoping to buy some warrants, but i guess i need to make sure i better understand pricing, anti-dilution, etc.  anyone have any book recommendations or website recommendations on learning more about warrants, options/leaps, rights, etc?

 

There is plenty of info on the web about how options work. For example:

 

Options Overview

 

or

 

Call Option

 

 

Warrants are different in that they are a specific contract with specific terms.  You can't just say "a warrant for XYZ stock" and know exactly how it works as you can say "a call option".  The way these specific class-A BAC warrants work is specified in here:

 

http://www.sec.gov/Archives/edgar/data/70858/000119312510047426/d424b5.htm

 

Once you understand how a call option works you can think of buying these BAC warrants as buying a call, as they give you the right to purchase a share of BAC on a certain date (01/16/2019) at a certain strike price ($13.30).  But there are differences.

 

  1) The warrants have an expiration date in 2019, you won't find a call with an expiration date that far out.

 

  2) The strike price isn't set in stone, but can be lowered depending on dividends issued by BAC between now and 2019. You can get the details from the above document.

 

  3) only a certain number of these warrants exist and neither you nor anyone else can create more. With call options anyone can "write" a new contract, so this limits the supply of these warrants to the current supply.

 

I think all 3 of these are an advantage of these warrants over buying long term BAC calls.  Although I do own some calls as well.

 

Hope this helps.

 

[compoundinglife]

yes.  congrats ericopoly and so many others on bac warrants!  i'm long the common.  was hoping to buy some warrants, but i guess i need to make sure i better understand pricing, anti-dilution, etc.  anyone have any book recommendations or website recommendations on learning more about warrants, options/leaps, rights, etc?

 

There is plenty of info on the web about how options work. For example:

 

Options Overview

 

or

 

Call Option

 

 

Warrants are different in that they are a specific contract with specific terms.  You can't just say "a warrant for XYZ stock" and know exactly how it works as you can say "a call option".  The way these specific class-A BAC warrants work is specified in here:

 

http://www.sec.gov/Archives/edgar/data/70858/000119312510047426/d424b5.htm

 

Once you understand how a call option works you can think of buying these BAC warrants as buying a call, as they give you the right to purchase a share of BAC on a certain date (01/16/2019) at a certain strike price ($13.30).  But there are differences.

 

  1) The warrants have an expiration date in 2019, you won't find a call with an expiration date that far out.

 

  2) The strike price isn't set in stone, but can be lowered depending on dividends issued by BAC between now and 2019. You can get the details from the above document.

 

  3) only a certain number of these warrants exist and neither you nor anyone else can create more. With call options anyone can "write" a new contract, so this limits the supply of these warrants to the current supply.

 

I think all 3 of these are an advantage of these warrants over buying long term BAC calls.  Although I do own some calls as well.

 

Hope this helps.

 

Should also point out that warrants are issued by the business and dilute shares outstanding when exercised. Options that you trade through your broker are a bet you place with someone else, no shares are issued by the business if you exercise.

[Uccmal]

yes.  congrats ericopoly and so many others on bac warrants!  i'm long the common.  was hoping to buy some warrants, but i guess i need to make sure i better understand pricing, anti-dilution, etc.  anyone have any book recommendations or website recommendations on learning more about warrants, options/leaps, rights, etc?

 

Try reading this thread.  If you google Bac warrants you come back here anyway.

 

Does anyone know why the underlying went up so much today?  I understand that it may just be sentiment changing, but it seems a little odd for sentiment change to come out of the blue, on one day, like this.

 

The article in Bloomberg and confirmation from BM in the presentation yesterday. 

 

These things always turn very quickly when they finally turn.

[rkbabang]

yes.  congrats ericopoly and so many others on bac warrants!  i'm long the common.  was hoping to buy some warrants, but i guess i need to make sure i better understand pricing, anti-dilution, etc.  anyone have any book recommendations or website recommendations on learning more about warrants, options/leaps, rights, etc?

 

There is plenty of info on the web about how options work. For example:

 

Options Overview

 

or

 

Call Option

 

 

Warrants are different in that they are a specific contract with specific terms.  You can't just say "a warrant for XYZ stock" and know exactly how it works as you can say "a call option".  The way these specific class-A BAC warrants work is specified in here:

 

http://www.sec.gov/Archives/edgar/data/70858/000119312510047426/d424b5.htm

 

Once you understand how a call option works you can think of buying these BAC warrants as buying a call, as they give you the right to purchase a share of BAC on a certain date (01/16/2019) at a certain strike price ($13.30).  But there are differences.

 

  1) The warrants have an expiration date in 2019, you won't find a call with an expiration date that far out.

 

  2) The strike price isn't set in stone, but can be lowered depending on dividends issued by BAC between now and 2019. You can get the details from the above document.

 

  3) only a certain number of these warrants exist and neither you nor anyone else can create more. With call options anyone can "write" a new contract, so this limits the supply of these warrants to the current supply.

 

I think all 3 of these are an advantage of these warrants over buying long term BAC calls.  Although I do own some calls as well.

 

Hope this helps.

 

Should also point out that warrants are issued by the business and dilute shares outstanding when exercised. Options that you trade through your broker are a bet you place with someone else, no shares are issued by the business if you exercise.

 

Yes, good point.  This is not an advantage to the warrants, but it isn't a disadvantage to them either. Since the warrants exist and will be exercised (or not) depending on the stock price and strike price on the expiration date whether you own them or not, I don't see this as a disadvantage to owning the warrants.  The amount of possible dilution is a known quantity and can be taken into account.

 

Are there any other differences that I have forgotten?

 

[txlaw]

It's also been fun owning the Jan-2014 LEAPS today. ;D

[gordoffh]

Curious to know if anyone added to postion today. I had a large position already and had set a target that if it broke through 10 i would add which i did. Plan to average up at set points to the tbv if it gets there.

 

[beerbaron]

Curious to know if anyone added to postion today. I had a large position already and had set a target that if it broke through 10 i would add which i did. Plan to average up at set points to the tbv if it gets there.

 

Do I understand correctly? If it went up you would buy more, that seems counter-intuitive in a value forum.

 

BeerBaron

[benchmark]

It's also been fun owning the Jan-2014 LEAPS today. ;D

 

I have some Jan-13 10 call option, which is still under water after today's run-up. I was mentally ready for it to expire worthless, but given today's run-up, I can sale and take a small loss. I know Sanjay has been on record of BAC to be at TBV by Chrisma, so it's tempting to gamble and wait till Jan-13...Sanjay, we need you to go out for big dinners every night :)

[actuary]

Curious to know if anyone added to postion today. I had a large position already and had set a target that if it broke through 10 i would add which i did. Plan to average up at set points to the tbv if it gets there.

 

Do I understand correctly? If it went up you would buy more, that seems counter-intuitive in a value forum.

 

BeerBaron

 

Rising price is more evidence from Mr. Market that the thesis is correct

[ECCO]

Curious to know if anyone added to postion today. I had a large position already and had set a target that if it broke through 10 i would add which i did. Plan to average up at set points to the tbv if it gets there.

 

Do I understand correctly? If it went up you would buy more, that seems counter-intuitive in a value forum.

 

BeerBaron

 

Rising price is more evidence from Mr. Market that the thesis is correct

 

It should be crystal clear now for analyst to increase their target price and rate BAC as a strong buy. That's the way it work, no?

[compoundinglife]

Curious to know if anyone added to postion today. I had a large position already and had set a target that if it broke through 10 i would add which i did. Plan to average up at set points to the tbv if it gets there.

 

Do I understand correctly? If it went up you would buy more, that seems counter-intuitive in a value forum.

 

BeerBaron

 

Rising price is more evidence from Mr. Market that the thesis is correct

 

It should be crystal clear now for analyst to increase their target price and rate BAC as a strong buy. That's the way it work, no?

 

I figured that would happen once it hits 15 :)

[gordoffh]

Posted by: compoundinglife

« on: Today at 04:11:13 PM » Insert Quote

Quote from: ECCO on Today at 04:07:30 PM

Quote from: actuary on Today at 04:01:24 PM

Quote from: beerbaron on Today at 03:30:16 PM

Quote from: gordoffh on Today at 03:11:06 PM

Curious to know if anyone added to postion today. I had a large position already and had set a target that if it broke through 10 i would add which i did. Plan to average up at set points to the tbv if it gets there.

 

Do I understand correctly? If it went up you would buy more, that seems counter-intuitive in a value forum.

 

BeerBaron

 

Rising price is more evidence from Mr. Market that the thesis is correct

 

It should be crystal clear now for analyst to increase their target price and rate BAC as a strong buy. That's the way it work, no?

 

I figured that would happen once it hits 15

 

The story is good and i did commit a good bit of change below 10. I could have backed the truck up and gone all in as eric did however couldn,t bring myself to do it so if it continues up i will buy more. Sure one could push all the chips in at a lower price but i guess i need bigger cojones.

 

 

 

[actuary]

Curious to know if anyone added to postion today. I had a large position already and had set a target that if it broke through 10 i would add which i did. Plan to average up at set points to the tbv if it gets there.

 

Do I understand correctly? If it went up you would buy more, that seems counter-intuitive in a value forum.

 

BeerBaron

 

Rising price is more evidence from Mr. Market that the thesis is correct

 

It should be crystal clear now for analyst to increase their target price and rate BAC as a strong buy. That's the way it work, no?

 

I think Soros calls that reflexivity

[MYDemaray]

Is my data wrong, or did a 31M share trade cross the tape in the aftermarket at 5:30pm EST?

 

Also, anyone have thoughts on what BAC is up to, loosening up conditions on their tender offer? 

http://www.reuters.com/article/2012/12/06/bankofamerica-mbia-idUSL1E8N609820121206?feedType=RSS&feedName=marketsNews&rpc=43

[meiroy]

http://www.bloomberg.com/news/2012-12-05/global-banking-under-siege-as-nations-tighten-local-rules.html

 

"Meeting multiple local requirements could mean global banks will have to maintain more capital than currently dictated by their home countries or international capital minimums established by Basel, according to Kim Olson, a principal at Deloitte & Touche LLP in New York and a former bank supervisor.

“This new standard is going to be very costly for foreign banks,” Olson said. “Some will have to raise additional capital just to comply with U.S. rules. Moving it around from the parent company won’t be enough because they’ll discover they need more than what Basel requires overall.”"

 

Maybe there should be a general financials thread.

[Kraven]

Also, anyone have thoughts on what BAC is up to, loosening up conditions on their tender offer? 

http://www.reuters.com/article/2012/12/06/bankofamerica-mbia-idUSL1E8N609820121206?feedType=RSS&feedName=marketsNews&rpc=43

 

Probably just trying to buy enough so that if something does happen to MBIA they ensure themselves a seat at the table.  Depending on the terms of the indenture, if they bought enough, say 25% typically of the amount not owned by the issuer (MBIA), they could be in a watchdog position and have the ability in certain circumstances to call an EOD if the situation arose.  That is, they wouldn't be a friendly willing to work with them.  And given that MBIA just bought back a huge slug of it, it probably wouldn't take that much (relatively speaking) to have that 25%, assuming those are the terms in the indenture.

[Guest Dazel]

 

We sold....only small position left...if it drops we would buy again. Raised cash  for other opportunities....everyone seems pretty happy as are we! (not greedy yet..but happy!) Europe has been fixed again as it has been 6 or 7 other times....perfect correlation...

 

Thanks for the tireless work all have done on the thread especially Ericopoly. We hope it continues to ride up for you guys and hits the tangible book for Sanjeev as a nice Xmas gift.

 

Dazel.

[Shane]

Dazel - surprised your selling early but I have a feeling you'll have a chance to buy in again...

 

Question to all: Buybacks from BAC would benefit B warrants the same as A warrants, correct?

 

[biaggio]

 

We sold....only small position left...if it drops we would buy again. Raised cash  for other opportunities....everyone seems pretty happy as are we! (not greedy yet..but happy!) Europe has been fixed again as it has been 6 or 7 other times....perfect correlation...

 

Thanks for the tireless work all have done on the thread especially Ericopoly. We hope it continues to ride up for you guys and hits the tangible book for Sanjeev as a nice Xmas gift.

 

Dazel.

 

That's impressive considering how emotionally good it feels to hold BAC to have the discipline to act on what you think is rational.

 

Will you be adding to ALS?

[ERICOPOLY]

Yes, good job Dazel.  For now I am going to be cheering for JPM to move out of the way -- it's valuation is low and likely will provide a ceiling to how far BAC can run in the near term.  Might already be causing a problem.  JPM's earnings power already shows through and it's only barely trading above tangible book value.

[redskin]

Nice to see the stock go up, but this is not advantageous to warrant holders.  Warrants will be worth a lot more if BAC is able to buy back a significant amount of shares over next 6 years.  Still wishing they had requested a buyback last year to take advantage of the single digit price.

[valueinvesting101]

B warrants expire on 10/28/2018 and have dividend threshold of 32 cents vs A warrants expire on 1/16/2019 and have dividend threshold of 1 cent.

 

From buyback perspective they should be same.