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clock Created with Sketch. 30/06/18
14:26
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Originally posted by pnh88
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Well there you go. Following my last post on options vs heads, the heads rose yesterday by 8.20% while the options rose by 17.40%. In addition the options represented a premium over the exercise price of 32% yesterday and today they represent a premium of 41.5%. This can be expected because as the heads move up, then the options provide better value because of the fixed 6.5c conversion. It's just basic leverage because of the higher amount of convertible options you get for the same price paid for the heads with a fixed exercise price. If we expect that the SP for the heads will increase significantly over the next year then the premium over the exercise price must also increase. In my example last post I talked about the SP rising to 25c. In this case you would pay 25c - 6.5 c to be indifferent between the heads (less commission). This is 18.5c which represents a 285% premium over the exercise price. If we look at possible downsides the SP may still be around 6c or worse. Decision time. Option 1: take a loss on the options and not convert to heads Option 2: pay the 6.5c and hope like hell the price increases past 6.5c There are no other options. (So as to speak...joke)
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Good stuff. There is a liquidity issue for me. I have not looked at it in depth though, I may add some options for my year 2 investment round since I do forecast huge growth and don't mind increasing risk exposure.
