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Silver Wheaton Corp. Message Board

  • namehij namehij Oct 28, 2005 6:53 PM Flag

    canadian vs. us

    I'm going to buy some slw warrants in the future. I know how warrants work but I'm confused on the currency risk. If the dollar depreciates against the can. dollar, is this good or bad if buying
    the canadian warrants?

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    • Warrants are boreing. Why do you think a company sells them? For their benefit.

    • "If the dollar depreciates against the can. dollar, is this good or bad if buying
      the canadian warrants?"

      In a word, "good" ...

      When you buy an equity on a foreign exchange you are actually doing TWO things ...

      1. You are buying the equity, in this case the SLW warrants, and depending on whether the market price of that equity rises or falls, you will make a profit or take a lose on that equity ...

      2. You are buying a foreign currency, in this case the Canadian Dollar, and depending on whether the exchange rate of that currency rises or falls, you will make a profit or take a loss on that currency ...

      So, as an American buying SLW warrants, you have TWO forces at work, the warrants and the currency ...

      Please note though, that this is ONLY applicable if the equity trades on a foreign exchange only ... for example, SLW "shares" trade in both the US and Canada and there is no benefit for an American to buy the "shares" in Canada ...

      Regards ...

      jc

      PS ... as a real life example, I am a Canadian and a little over a year ago I bought a stock that trades only in the US ... after about a year, the "stock" was up about 3% and going nowhere, so I sold it ...

      Unfortunately, during that time, the US dollar had weakened by about 5% against the Canadian dollar ...

      So while I made a 3% profit on the "stock", I also took a 5% loss on the "currency" for a "net loss" of 2% ...

      It was the only time I took a "loss" on a "profitable" trade, lol ...

 
SLW
21.39-0.86(-3.87%)Sep 19 4:07 PMEDT

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