simple story
u wanna buy karipap (stock) next year
but next year u think karipap price increase from 30sen to 40sen or more
so u make contract (warrant) with that seller to buy karipap at
30sen (exercise price) in year 2009 (expiry date)
the contract price is 5 sen each (warrant price)
1 contract for 1 karipap (conversion ratio)

so next year...
karipap price increase to 50sen.
but with the contract...you pay 35 sen only (contract+karipap)
if u sell that karipap to others..u profit 15 sen (30 percent)

but..

instead of selling the karipap..u sell the contract
normally contract price will increase to 20 sen coz the karipap price increase to 50 sen (20 sen..coz 20+30=50sen karipap current price)
u buy the contract at 5 sen..and u sell at 20 sen (300 percent profit)

see..the return is very big..but the risk is bigger too..
if the karipap price fell to 20sen
ur contract is worthless
coz if u use the contract u will be paying 35sen (around 80 percent more)

okeh tak cerita hehe

This post has been edited by greddym3: Jan 16 2008, 01:42 AM