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Bac-wta warrants @ expiry


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I feel some experts in warrants/options can help me out. I have one basic about warrant expiry and delivery.

 

In case of bac-wta, if I buy 100000 warrants at 3.25.

 

In January 2019 at expiry if warrants are in the money, would I need to add additional money to my account @ 13.3 * 100000 = 1330000. ?  Or no additional money will be required at delivery?

 

Or since warrants are in money what  cost basis would be adjusted to ?

 

Any advice on tax implication. Any reference will help.

 

Greatly appreciate. Thanks.

 

 

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Simplest course of action would be to just sell your warrants before expiration.  There will be plenty of arbitrageurs willing to take them off your hands and exercise them for just a few pennies of profit.  I usually take them up on this service unless the bid on the warrants is at a significant spread to the common stock. 

 

This assumes, of course, that BAC will be at fair value upon expiration.  If you still want to own BAC common stock, then yes, you'd have to add money to your account and ask your broker to exercise the warrants.  Your cost basis in the stock would be the exercise price + cost basis in the warrants.  No taxes until you sell the common.

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