Expected Positive News Flow, page-164

Why buy LOMOB besides leverage?

There is company making news just around the corner, they will be drilling L259 kimberlite. I'll give you one scenario why you would want to buy LOMOB instead of LOM

Your position is 100,000 units...

100,000 LOM cost you $40,000

100,000 LOMOB cost you $10,000 (leaving $30k in the bank what you would have used to buy LOM)

The drilling comes up trumps and diamonds everywhere, LOM and LOMOB sky rockets, everybody is happy...

If you hold LOM you have made a fortune from your $40k

If you hold LOMOB you are happy to convert the 100,000 options to shares with the $30k you have left in your bank...


If drilling isn't a success and there are no diamonds in L259 and this isn't the primary source kimberlite...

LOM sinks to 15c: You are down $25k from your initial $40k investment...

LOMOB worthless and you lose your $10k but still have $30k in the bank...

If you like LOM for the long term and still believe they will find the primary source kimberlite on their grounds, then you can spend the $30k buying back 200,000 shares at 15c for the long term, or even just the 100,000 shares and keeping $15k in the bank...

You can use options like this as a risk/reward scenario when there is imminent company making news around the corner. Then you don't have to stump up all of your money right away, you have the option to convert later, possibly after good news...