I'm looking into how warrants convert to options and backwards.
I assume that buying 1 NAB option contract is the same as buying 4000 NAB warrants where multiplier is 4.
Let's say, NAB stock has warrant:
NABWOG CTW EQUITY CALL CALL 23 Sep 2010 $26.00 4 22/22.5
So strike is 26, multiplier is 4 and price is 22/22.5 (bid/ask)
The corresponding option is:
NABVB8 23 Sep 2010 $26.00 0.545/0.655
So the option quoted has exposure to 1 share and is quoted in dollars (it's not multiplied by 1000 to get exposure of the full contract size). Warrant has exposure to a quoter of a share and is quoted in cents. To convert the warrant to option I multiply warrant price by 0.04 and I get 0.880/0.900. I expected it to be close to 0.545/0.655.
The question is why warrant is more expensive but have much tighter spread?