Stock Warrants Leverage Indicator
This is a very simple calculation being the price of the common shares divided by the price of the stock warrants.
For example, one of my current positions is stock warrants on a gold company, complete details of which are available for subscribers in our databases.
The warrants will expire on October 6, 2021, yes a remaining life of over 4 years.
The current price of the common shares is C$1.05 and the current price of the stock warrants is C$0.25. Thus, the leverage factor in this example would be 4.2 (C$1.05 divided by C$0.25), which is great.
The higher the Leverage Indicator the better, but there is a reason that I do not use this calculation as the holy grail. Using a pure but simple formula is easy but it does not take into consideration the remaining life of the stock warrants.
If the stock warrants are nearing expiration and ‘out of the money’ it is common for the Leverage Indicator to be very high, which can be greatly deceiving.
If you use this Leverage Indicator, I suggest you make sure the stock warrants have a remaining life of 2 years or more.
All the best of investing and I invite you to visit me at http://CommonStockWarrants.com and receive your free copy of my recent publication, “The Stock Warrant Handbook“, Your Personal Guide To Trading Stock Warrants.