Van’s note: Here at The Bleeding Edge, we share the latest in the world of technology. But periodically, we find other investment ideas that we think are worth bringing to our readers…
Today, we’re bringing an eye-catching idea from our friends and colleagues from Casey Research. John Pangere and Dave Forest are experts at locating profits from a little-known security… one that wealthy and connected investors use to turn small sums into huge profits.
Now John and Dave are bringing to light how everyday investors can make triple- and even quadruple-digit profits by speculating with this security. In just a short period of time, their regular readers had the chance to book gains of 392%, 470%, and even an astonishing 4,942%.
As they say, it’s not every day you can turn dimes into dollars…
That’s why on Wednesday, October 20, at 8 p.m. ET, Dave will reveal their next target. It’s an opportunity so immense that he’ll be holding his first event ever called “Zero to Retirement Summit.” This is an event you won’t want to miss. You can go right here to sign up.
And keep on reading to hear the story of one key stock market genius who saw what warrants could do…
One of the most successful investors of all time isn’t who you think. He didn’t start his career in finance. He didn’t even intend to become a stock market genius.
All Edward Thorp wanted was to be a math professor. With a Ph.D. in hand, Thorp pioneered the modern applications of probability theory. (Probability is the foundation for statistics.)
Thorp focused on using his knowledge to solve real-world problems once deemed impossible.
So while Thorp was a math professor by day… by night, he hit the blackjack tables.
Beating the House
After reading a paper about the optimal betting size by Bell Labs researcher J. L. Kelly, Thorp thought he could devise a system to win at blackjack.
At the time, most casinos were using a standard 52-card deck at blackjack tables. They didn’t always reshuffle the deck after every hand.
So Thorp made his own card counting schemes to help improve his odds.
In 1966, he wrote a book about his method. Beat the Dealer: A Winning Strategy for the Game of Twenty-One is still one of the top books for serious blackjack players.
Eventually, he convinced bookie Manny Kimmel to stake him $10,000 to prove his strategy. It was a success. Thorp won $11,000 on his first trip, much more than his annual $6,900 salary teaching math.
But as time went on, casinos caught on. He resorted to disguises just to sit and play.
After too much success and more recognition, it was time to move on.
From Sin City to Wall Street
Thorp wasn’t finished proving his math genius. If his strategies could work at the blackjack table… why not in the stock market, too?
That’s when he came across his golden goose: warrants.
Not all readers may be familiar with warrants. That’s why my colleague Dave Forest and I have worked to show readers how warrants can take your portfolio to a new level.
In simple terms, a warrant is similar to having an option on a stock. It is a security issued by a company to an investor. And it gives the investor the right to buy stock directly from the company at a specific price – the strike price – for a specific time.
In most cases, that time period is anywhere from five to 10 years. That’s a lot of time. It allows investors the chance to buy a company’s stock at a significant discount to its current market price.
That’s what drew Thorp in. So he wrote another book in 1967, Beat the Market, about what he found with warrants. As he wrote with co-author Sheen T. Kassouf:
For the first time, my investments were virtually assured of success. I was no longer at the mercy of strange chart formations that smacked of astrology. And it was no longer necessary for the market to eventually agree with me on the value of a security. As I perfected my operations, investment after investment proved profitable.
Thorp’s fate was set.
The man who beat Vegas now had a way to beat Wall Street. And warrants played center stage.
Small Bets. Big Gains
Thorp realized that traders often misprice warrants… if they know they exist at all. As he said in his book A Man for All Markets:
A warrant, like a lottery ticket, was always worth something before it expired even if the stock price was very low… The more time left, and the higher the stock price, the more the warrant was likely to be worth.
Warrants have value. It’s just a matter of using a system to pick the ones that have a higher chance of turning into big winners.
That’s what Thorp realized. So in 1969, he started Princeton/Newport Partners. After raising $1.4 million, he was in business.
With his system in place, Thorp showed what was possible with warrants.
For instance, in 1972, warrants of resort and casino developer Mary Carter Paint Company traded for 27 cents. At the time, the stock traded for $8. So Thorp bought 10,800 warrants for $3,200.
At one point, the stock dropped to $1.50. The warrants went with it, heading almost to zero. Thorp never wavered. He let his system play out and bought even more warrants.
Then in 1978, something interesting happened. Mary Carter Paint owned property in Atlantic City, NJ. The company successfully lobbied to bring casinos to the state. And in May of that year, it opened the first casino outside Nevada.
The company reaped windfall profits. The stock and warrants surged. Thorp cashed out, making over $1 million on the trade. He would do this over and over again for decades.
In almost 29 years as a professional investor, Thorp booked 20% average annual gains after fees. More importantly, he never had a losing year.
Warrants helped him get there.
Our Secret for Turning Dimes Into Dollars
Most investors have no idea warrants exist. In fact, even if they do, they don’t know that you can trade them just like any other stock.
That’s by design.
When wealthy and connected investors find ways to turn small sums into huge windfalls, they tend not to share the details with everyone else. That is, unless you’re willing to invest millions with them and pay them 20% – or more – in fees.
That may seem unfair, and it is. That’s why Dave and I decided to blow the lid off of speculating with warrants.
In just a short period of time, regular readers had the chance to book gains of 392% and 470%, and we even closed two winners out for gains of 2,805% and an astonishing 4,942%.
That doesn’t include some of our current positions showing triple- and quadruple-digit gains so far.
It’s not every day you can turn dimes into dollars… or turn $100 into $2,900. Or $1,000 into $50,000.
Speculators like Ed Thorp saw what warrants could do. Now our readers are benefiting from the same secret strategy that was the speculating playground of wealthy investors.
But we’re just getting started. And on Wednesday, October 20, at 8 p.m. ET, my colleague Dave Forest will reveal our next target.
It’s an opportunity so extraordinary that Dave is holding his first event ever called “Zero to Retirement Summit.”
It’s a way to potentially make 49 years of profits in ONE trade.
And we’ve set up a special page for you to sign up to get all of the details.
See you there.
Co-editor, Strategic Trader