Instalment warrant put option
Self Funded Instalment Warrants Review
Transcripts on this website are created by an independent transcription service. The ABC does not warrant the accuracy of the transcripts. Well, there are just three weeks to go now before 1.
Warrant
When the T2 float was offered,people became investors in Telstra for the first time, optimistic that the gains seen in the first Telstra float would be repeated. But it has not worked out that way. T2 investors have watched as their share price has fallen an average 30 per cent. It means that T2 investors now have a difficult decision to make.
Will they be throwing good money after bad if they follow through on their final calls? Business and economics editor Alan Kohler reports. KELVIN THOROGOOD, TELSTRA INVESTOR: For the average person it probably is good money gone bad. All we can tell them is that they're perhaps getting a crash course in some lessons that investors normally learn over perhaps a slightly longer period. For Australians like Kelvin Thorogood, the second Telstra float has become a painful lesson in the risks of investing in the stockmarket just as the first float was a lesson in its benefits.
I'm concerned that John Fahey, the finance minister, last year was basically standing up and waving a flag and blowing his trumpet and saying how fantastic this offer's been and yet, in the running paying the final instalment of T2, he's nowhere to be seen. And I think that would be disturbing for the average man in the street. I find it difficult to go to the Federal Government next year and argue for the rest of the privatisation of Telstra because they're gonna have to go to the people like myself and the ordinary man in the street and say "Look, are you going to shell more money out for the privatisation of Telstra?
Are you hearing from many investors who borrowed to pay the first instalment on T2? We're hearing from some and they're the ones who we're particularly sorry for because they came into the market for the first time and borrowed to do that and now do they borrow again, what do they do?
It's a very, very difficult situation for them. Now, there are only two choices -- either you take the money out of the bank to pay it back or you borrow it again. And, if it's to be borrowed it's just a matter of getting the best terms. At the end of the instalment warrant put option they made the commitment to pay when they bought hedging fx with options shares when they originally floated.
It's just had a month deferral of part of the payment. It could be a very good strategy for those people that want to actually realise the capital loss bankers exposed binary option system z906 they can then offset that against any other capital gains that instalment warrant put option may have in their portfolio.
And what are you going to do? I'm going to pay up. But then most of my Telstra holding was bought in T1. I did a topping up in T2, so on balance I'm still ahead. And, in any case, I look at Telstra as a long-term investment and it is part of a portfolio so I can let it ride. Those who can't or don't yahoo widgets stock market to pay up have a bewildering array of loan or deferral products from stockbrokers and banks to choose from.
Leo is a professional share trader who is more sophisticated than most. The option that I would prefer is putting some money into a margin lending account and taking it from there. So you'll borrow again in effect? And why is that?
Because of the flexibility you've got in if they go up you can sell them. A bit more liquid.
Whereas, the instalments is always a forex hours refco trading, I think. Admittedly with a lending account you could get margin calls and you've got to be prepared to put some money in ALAN KOHLER: If you don't want to be subject to margin calls, there are things called warrants being offered by many investment banks. Effectively these are simply more expensive loans.
The headline interest rate on a lot of these products is in the low 9 per cent. But there are certain costs associated with these products, including transaction costs and, of course, protection costs. And these costs basically bring our product up to an interest rate in the vicinity of 11 per cent and the range in the market tends to be about But financial planner Kevin Bailey advises investors only to use those deferral products if they have to.
People are considering them because they want to defer the pain. We want to put off pain to another day. Why not put off till tomorrow what we don't have to do today. But at the end of the day, they are very expensive, in my book, and in fact they're actually increasing their gearing and increasing their debt and leverage at a time when its perhaps not prudent to be doing so.
Do you think it would be a good strategy to just sell out now because they've done so badly?
Can you please explain how instalment warrants are priced? - simyviqoj.web.fc2.com
I think it would be a disastrous strategy to sell out now. The bad news is in the market. They've gone in to the market and bought at a high point and if they sell out now they sell at a low point which is the absolutely the worst thing that investor could do. Kelvin Thorogood has learned at least that much about investing. He'll be coughing up, but he'll need some fortification. I'll be sitting down with a chardonnay, grimacing and writing my cheque out for the T2 instalments Transcripts on this website are created by an independent transcription service.
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