Sorry for the long read
With the correction of the market buying opportunities have presented themselves through quality stocks with great dividend yields, like LPTs in ASX100 yielding 10%+. I want to take advantage of this through purchasing warrants but haven't used this derivative before.
My plan is more on investing rather than trading. I plan to purchase long term warrants (many years left till exercise date) and use the dividend repayments to pay interest, fees and lower loan ammount. These high yield stocks purchased will hopefully have enough annual dividends (at these prices) to fully pay for the holding costs of the warrant. At exercise date I will take possession of the underlying stock which will hopefully have increased in CG. I just have a few questions on warrants before I impliment this strategy
1) What is the average interest payable on the loan ammount, ie: is there a standard charged above the base IR.
2) what are the rough purchasing and ongoing costs with warrants.
3) If I purchase the warrants on market through my etrade account how will the issuer identify me as the owner of the warrant and how will I go about paying the annual interest and fees.
4) Is there any risks in warrants apart from stock being lower than exercise price. Would like to hear peoples experiences with warrants - particularly those that didn't work out too well.
5) What do people think of my approach. Could it be improved.
Thanks and happy easter all.