The Easiest Warrant Trade You Can Make

In response to my email to subscribers yesterday, and my SPAC post, I received some excellent emails with thoughtful comments and questions. Thank you, you guys are awesome!

One of the questions, which I get asked often, is whether you have to be a day trader to trade warrants. The answer is absolutely not.

I’ve written about this type of trade often, but in long, detailed, put you to sleep posts. So, what I want to do here is give you a short, to the point, post that will help you set-up a warrant trading system.

Of course, I’m talking about trading a warrant or rights expiration. This post is especially for those of you who don’t like to sit in front of a blinking screen all day with a blood pressure monitor hooked to your arm.

Let’s get right to it.

First, get your warrant list together. You’ll be using this to track expiring warrants, or to find rights offerings. I show you how here and you can get a jump start here if you want.

Second, once you have your list look up the expiration dates for the warrants. They can all be found in the SEC filings. Step one and two will take a little time, but nothing you can’t handle over a cocktail or two in a few evenings.

Three, monitor your list and as an expiration approaches run through this checklist. If most of these criteria are met then make the trade I detail below.

Now, for number four. This is your trading system. While I do a little more around this, if I had to sit with someone for two minutes and have them make this trade this is exactly what I would tell them.

  • Buy the common stock on the last day the warrant trades, usually the expiration date, but the company will have put out a press release around the expiration telling you exactly what day this is. You can buy it at any time that day, but ideally an hour before the market closes.
  • Place a limit order to sell the stock 10% above your purchase price and make it a “good-til-cancelled” (GTC) order (meaning the order will stay in your account until you cancel it). Most brokers offer a multi-trade option, or conditional trading. Just ask your broker if you can put in an order like this: “I want to put in a limit order to sell the stock up 10% or down 3%, whichever comes first.” If your broker offers that, then that is exactly what you want to tell them.
  • Look at your account one week later. If you still own the stock, meaning it has not risen 10% or fallen 3%, then cancel your previous order and sell it at whatever price it is currently trading at.

That’s it. Do this as many times a year as you find warrants expiring that meet the criteria in the checklist. You now have an easy, proven, profitable warrant trading system (in just 500 words, lol).

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