Advice from articles on trading of warrants suggested a learning period of twelve months and starting with a modest capital outlay and definitely money that one can afford to loose. All articles advocated a trading plan that by the way should be strictly adhered to at all times. The literature however only offered examples of typical trading plans, so I based my first trading game plan on my experience as an investor and investment and trading strategies. The plan served me well and taught me the value of adhering to my own plan. I ignored rule 5 of my trading plan early on in my project and bought four warrants over JSE listed bank shares with catastrophic results.

1. Maximum size of a single transaction / bet – 10% of total funds in my trading account.

2. Maximum number of live / open market positions – five.

3. Maximum amount of available money tied up in open positions – 50%.

4. Maximum time frame for open positions in the market – 4 weeks.

5. Open positions should all be from different financial market sectors.

6. Decide the entry and exit points for each trade before placing the order.

7. Buy only warrants over shares of companies that I am totally familiar with (only JSE listed Top 40 companies).

8. Not to trade in warrants with less than three months to expiry.

9. Always use a stop loss to exit a losing trade.

10. Committed to keep informed of the financial environment and the developments that influence financial markets.

www.warranttrader.co.za is only concerned with speculation with warrants.

                                                                                                                             Henning Botes, July 2008