options starting to look cheap?, page-6

Gecko,

If the SP goes over 10c which is the exercise price of the options, Option holders will start to Pay 10c to convert the option into a share. This 10c will go to FAS and FAS will issue a share for every option exercised.

eg

Punter buys 1,000,000 options today for 0.006

the SP between now and August 2014 (option expiry date) goes to 15c.

Effectively, the punter could sell the options on market for anywhere near 5c (the gap/arbitrage between exercise price and share price) or exercise them for 10c and sell the issued shares for 15c

ie $1,000 investment and profit $50k

The downside is that if the SP doesn't go up over 10c, the options will expire out of the money and be worthless.