Thursday, 10 September 2015

Penny Warrants are very risky.

Warrants with only 1 - 2 weeks left to maturity and over 10% out-of-the-money (OTM) are called penny warrants.

They are very risky and their odds are low.  The reasons are as follows:

1.  The bid/ask spreads of penny warrants are rather wide.

2.  Penny warrants have a very high rate of time decay.

3.  It is easy to lose money with penny warrants.

4.  Penny warrants may be not that price sensitive.  

5.  Penny warrants can hardly edge up but easily plummet.

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