Stock Warrants | Edward Thorp’s 20% Annual Return For 30 Years

March 13, 2017 Preston Pysh , CONTRIBUTOR   Shutterstock Edward Thorp is the bestselling author of Beat the Dealer. He revolutionized gambling as he proved how to beat blackjack with card-counting and invented the first wearable computer. As Thorp transitioned out of gambling, he then achieved the unthinkable with 20% annual returns over 30 years trading options. Below is an edited summary of his interview with The Investor’s Podcast where Thorp discusses probabilities and his storied investing career. Preston Pysh: [6:09] I am curious to know how you came up with the idea to beat the odds of blackjack when everyone else believed that it could never be done. Edward Thorp: By solving equations, it is possible to calculate the precise probabilities of losing, given any collection of cards for any number of decks. To calculate these probabilities, I first had a computer take out four aces from a full deck, and I discovered that the deck shifted in favor of the casino by quite a lot. This was good news because if I put back in four aces, I knew the exact opposite would happen and the cards would now be in my favor. I repeated this process with all ranks of the deck. When the deck is filled with big cards, it becomes in favor of the player. On the contrary, when the deck is filled with small cards, it shifts the edge in favor of the casino. Therefore, players want small cards to come out of the … Continue reading

Market Place | The Nature Of Warrants

Editors Note from Dudley Pierce Baker, Founder-Editor of “This is an incredible article written in 1983 which shows the opportunities and potential wealth which can be created by investing in long-term warrants.” By Vartanig G. Vartan Published: January 12, 1983 THE Chrysler Corporation’s common stock was a huge winner on the New York Stock Exchange last year, starting out just above $3 a share and climbing above $18. But, percentagewise, Chrysler’s warrants did even better, jumping from a low of 1 1/8 to a high of 10 1/2. Thus, the old-fashioned warrant, after being upstaged in recent years by explosive trading in listed call options, showed it has some life left -for the right issue at the right price. Basically, a warrant gives its holder the right to purchase a stock at a set price during a specified time period. In this respect, it is similar to a call option. ”But the key difference is the time factor,” said Eli Tanenbaum, an analyst with Lipper Analytical Distributors Inc. ”Whereas a warrant is essentially a long-term option to buy, a call option has a maximum life of nine months. Some warrants, in fact, are perpetual, while many have a life span of several years.” There are other differences as well. Warrants often possess individually tailored terms, and these may be subject to change by the issuing company. Any prospective buyer of warrants should always take care to check the terms and, later, to keep current with any changes. As for … Continue reading