New CWs trading at premium of 50%! (re-posted)

The 3 new CWs listed today, i.e. Genting-CD, PBB-CB & YTL-CB were very well-received by the market. I do wonder whether the players know how high is the premium for these CWs now?

I've mentioned before the pitfall of issuing CW with excessively high exercise ratio (see this post). To wit,

"The high exercise ratio of these CWs would improve affordability but an 10-for-1 exercise ratio for a share trading in the RM10-20 bracket and an 4-for-1 exercise ratio for a share trading below RM5.00 is really pushing the limit. Are we likely to see a CW issued one day for Genting with an exercise ratio of 25-for-1? If you cannot afford to buy too many a high priced CW, then you should buy less. After all, one can buy in multiples of 100 units. This lowering of the price of CWs would only induce retail players to throw caution into the wind; the result of which is only too predictable."

What I've written, is now staring at me. For example, Genting-CD was trading at RM0.415 as at 9.10 a.m this morning. At that price, this CW is trading at a premium of 50%! How high is that premium? Let's put it this way; a person who has bought 50 units of this CW at total cost of RM20.75, is betting that in 6-month period, the share of Genting will exceed the price of RM59.75 (i.e. exercise price of RM39.00 plus total cost of 50 units of Genting-CD). Is it likely that Genting will jump by 50% in 6 months' time? By the way, Genting was trading at RM39.75 as at 9.10 a.m. this morning.



The new & amended table


The earlier table (with errors noted)

Error explained

The error was due to the formula used to compute the premium for each CW. I should have known about the error as PBB-CB & YTL-CB were assigned much lower premium than Genting-CD under the earlier computation.