Warrant Option Pricing

The Treasury’s debut auction successfully tested a market mechanism for selling the warrants it received as an extra possible source of return when it injected taxpayer money into banks. But it also made earlier buybacks negotiated with Treasury look rich and suggests that Jamie Dimon, JPMorgan’s chief, did right by his shareholders by not buying his warrants back, Breakingviews says.

NEW YORK, Aug 25 (Reuters) – Warrants attached to Warren Buffett’s $5 billion preferred stock investment in Bank of America Corp (BAC.N) were worth nearly twice as much as his existing warrants in Goldman Sachs Group Inc (GS.N) just hours after the deal was announced on Thursday. Jon Najarian, co-founder of options trading firm optionMONSTER, said the 700 million options Bank of America granted to Buffett’s Berkshire Hathaway Inc (BRKa.N), at a strike price of just over $7.14 are now worth …