Forum Archive Index - January 2000

["Greg Ludgate" <ludgateg@ihug.co.nz>]

 

 

Hi folks,just after some info on options & hoping some one could help me.
Company ABC Ltd's share price is $0.50.Their options are selling at $0.10 with an ex price at $0.60 on 1 March 2000. In lamens terms could someone please explain the following:
1)The share price rockets,goes to $1.50 the options are now at $0.80.They are now $0.20 more expensive than their ex price.What happens if I bought 500,000 options at $0.10 & 1a)500,000 @ $0.80 What happens to that "extra" $0.20????

As the exercise date for the options gets closer the price of the options should be price of head share less exercise price of option. So in your example 1)head share trades at $1.50 say Feb 28th less 60c exercise price then the options should be trading at 90c. Any less and you have a bargain any more and you have paid too much !!

 

2)Bad news!! Company dosen't do well,price drifts down from $0.50-$0.30 & the options go from $0.10- $0.05.If I bought 500,000 options at $0.10 & by
1 March (ex date) they're still in the dunnger what happens ????

Any help guys really appreciated!

You have blown $50k

You wouldn't exercise the options for 60c when the head shares are trading at only 30c. Thats the danger of options and warrants !! when things go down . Ive been burnt once and am not an expert.

Something is up with AQL big vols last 2 days - 4ml & 8ml !!.Got in at 17.5. Also hold SMR(38c) & SPE (9.8c).

 Anybody know any news re SPE has climbed quietly to 40c since restructuring. Going e-commerce??

Hope this helps Daryl

Greg