On 10 April 2009, I noticed that Sime gained around RM0.35 from RM6.15 to RM6.50, sime-cg still hadn't respond to it. KLCI was moving upward on that day too. So I bought 20000 of sime-cg at RM0.135 (total investment capital was RM2700). RM0.135 was the lowest price of the day. I was right, sime-cg responded to its mother share and closed at RM0.15. I was happy as I managed to gain an unrealised profit of 11% on that day.
On 14 May 2009, I noticed that sime had reached its resistance level. I was not confident that sime would keep moving upward, so i sold all my sime-cg at RM0.18. On that day, sime closed at RM6.55.
With a investment capital of RM2700, if I were to buy sime (stock) at RM6.15 on 10 April 2009 and sold them on 14 May 2009, I could only manage to realised a profit of 6.5% (RM175).
With the same investment capital of RM2700 invested on sime-cg (call warrant), I managed to realised a profit of 33% (RM900).
The leverage effect enables me to gain exposure to the underlying through a small amount of money.
Enjoy your trading.
GOon
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