3 Ways Trading Warrants is Like The Twilight Zone
Did you guys watch the original Twilight Zone?
The new one is OK, actually has a few decent episodes, but I’m old school and LOVE the old one.
One of the best parts of the show was the beginning, when you’d see like a 1-2 minute clip of the story, then Rod Serling would come on with an intro telling you the main character was about to “enter the Twilight Zone”.
What a line. The first time you see the shows you’re totally like “WHAT IS GOING TO HAPPEN TO THIS DUDE (OR DUDETTE)?”
Then you got into the show, and in the best ones, there was a lot of “wait, what?” Is that monster on the wing real, or is Shatner just imagining it?
That giant alien was just a balloon, and the real one is an inch tall? I wish I could go back to a town in the 1800s and just attend band concerts every weekend in the town square!
Well, if you’ve ever thought about trading warrants, you probably didn’t realize it, but in order to make money from them, you need to enter the Warrant Twilight Zone.
We Believe We are SOOOO Efficient
We live in a world where a lot of things are VERY efficient. You tell Alexa to order your new 4K TV, and it’s at your house a few hours later.
Your Apple Watch tracks your exercise and heart rate, you can literally run a multimillion dollar business from your phone (my 16 year old has already begun hers, arbitraging thrifted clothes), and you can talk to the delivery guy at your door, even though you’re vacationing in Bali.
Inefficiencies are so yesterday. The stock market has bots and algorithms and Robinhood and automated buy and sell programs and charts, and charts, and charts, and trading firms that locate near the exchange so their orders can be executed .00000001 seconds faster than the guy located another mile away.
So, how in the world did a stock trade to $500 while a warrant that was exercisable at $11.50 traded at $0.50? (Phunware, PHUN…if you haven’t read this please do)
How could you possibly buy the warrant of a stock BEFORE the “as reported on CNBC” IPO and have the warrant go up over 1,000% in just a few months?
Yeah, we did that. (If you’re new to my list you didn’t see my email where I talked about the fact that I was hired to do a due diligence on the company that built the first SpaceShipOne, so I admit to a little unfair advantage there…SPCEWS)
Why does one not yet exercisable warrant with an exercise price of $11.50 trade in line with the stock, even though the SPAC merger has not taken place yet (DEACW), while another, in which the merger has closed (but the warrant still isn’t exercisable yet) trade at a $5 discount to the price of the common? (VVNTW)
Welcome my friend to the inefficient, and Twilightish world of warrants!!
IF you can suspend your belief that “the markets are EFFICIENT” then you too can make money where you “shouldn’t” be able to.
So, how did the Twilight Zone characters navigate the Zone and live to tell about it…at least some of them? And how is that relevant to warrant trading?
Action!!
First, they took action on what was in front of them whether they thought they were crazy, or wrong.
Shatner, who was recovering from a nervous breakdown when he saw that monster on the wing of his plane didn’t think “Oh, I’m just imagining it, it’s not real”…though he may have wished it weren’t.
Dude found a way to get a gun on the airplane and shot out the fricking window mid-flight.
He was wheeled off in a straight jacket at the end, but that was only because they hadn’t checked the plane’s wing yet to see the “monster” had almost ripped the engine off the plane.
Well done is better than well said.
Benjamin Franklin
Warrant trades require action, often when you’re not quite sure what you’re seeing.
Literally this morning one of my subscribers posted in our forum, “What am I missing here…” after a warrant we were long jumped 40% higher. The answer was nothing. It’s real, take action. In this case take some profit…and find the next monster.
You Gotta Believe
Second, the Twilight Zone survivors believed in the unbelievable.
When those little space dudes landed on the old lady’s shack, she didn’t say, “Oh, probably imagining this flying saucer.” Nope. She beat the crap out of them and made sure no invasion took place.
Did they believe that little kid could punish them if they didn’t do what he told them too? Well, if they didn’t, they got punished right up. That will make you a believer.
In warrant Twilight Zone, often you have to believe.
Would you believe that warrants that you could potentially trade in for a $500 stock could be bought for $.50? (I’m simplifying for dramatic effect here, you never really could have traded them in for a $500 stock, but there was a REALLY GOOD chance you could trade them in for at least a $500 stock that would likely become a $15 stock, still a pretty good deal…again, you can read the details here.)
I didn’t believe the warrants were worth anywhere close to $500 either, but $0.50? Come on man. That was unbelievable…
Our little group believed they were worth more…turns out they were, warrant Twilight Zone.
Work, Work, Work
And third, those Twilight characters put in some work if they wanted to survive.
Remember the cookbook? Well, they put some resources into getting that thing translated. And once they had done the work…it was still too late for that one dude on the saucer, and all the others that went before him.
But, everyone else knew not to get onto those “vacation” saucers.
It may take time to figure it out, but putting in some work in warrant Twilight Zone is VERY rewarding.
Thinking is the hardest work there is, which is probably the reason so few engage in it.
Henry Ford
Most people want to be spoon fed (get it, spoon fed, cookbook, stay with me here) what Cramer says, or the other talking heads on CNBC. But the few who do some work in the Warrant Twilight Zone, just like in the TV show, win out.
Oh, and if you want some help navigating warrant Twilight Zone, we can be found here…or can we…