r options tradable, page-12

time to. ops are very simple. with an op you own the right to own a share for a guaranteed fixed price. 4c to buy the op and another 15c to make it a share. Ops will be bought and sold just like shares with all the same brokeage etc.

When we talk about premium we mean if the difference between the ops and shares is less than (in this case) 15c. When we talk about leverage think about this example :

you have $30,000 to spend on CVI and the shares are 30c and the ops are at a 5c premium at 20c. You can buy 100,000 shares or you can buy 150,000 ops. If in a years time the shares are now $1 and the premium has disappeared from the ops at 85c then the shares would be worth $100,000 but the ops would be worth $127,500. So you would get more bang for your buck on the ops. But as the price of the share goes up the PERCENTAGE difference to the ops is greatly reduced so this extra profit starts to diminish and therefore, as T4P was explaining, the premium disappears as the incentive to hold ops reduces.

Here is one suggested strategy for an aggressive investor who is very bullish on CVI : If there is a period of no premium as T4P suggests could be the case as holders take profit you could switch into the ops giving you bigger gains as the price rises. But be careful the reverse is also true if the price drops. But on the other hand if the ops open at 50c the leverage is not gonna be that great so it may not be worth the effort. Still may be a good opportunity to get some extra exposure though via the ops.