trading halt, page-21

Hi Bernard

Thanks for the compliment, I'll throw another 2c in - this could get expensive ;-)

My view is that you don't buy HEGO now unless you intend to exercise come Sept. You are right that they are trading at a discount, but this is IMO because there are some holders needing to sell to get the funds to exercise before 20 Jun and the buyers are backing off the bid, hence the depressed price.

The heads price diverged significantly today after the (more good news) announcement with the closing price of 29c up 11.5% HEGO down 13.6%!), some unfilled sellers came in the last 30 mins, perhaps trying to take advantage of the sp strength and hoping to liquidate to exercise HEGO - who knows?

If you know you have the cash to exercise in Sept (and your better half is agreeable) this is a good buying opportunity - remember this when the new options eventually come up for expiry, or another rights issue teaser!

There may be a window once the new options are issued, say end July/early August, where the sp will settle down and it will be ecomonic to sell HEGO and roll into (buy) the new longer-dated options - this is something I've been thinking about over the last few days as an alternative to exercising all my HEGO now and looking to eventually sell down HEG to release back my capital and then buy more of the new options to retain my exposure. Perhaps an each-way bet is a good idea?

If you want a interesting book to read regarding equity options, see if you can pick up a copy of 'Equity Options' by Hugh Denning, it was out of print for a few years, but a re-print was around a year or so ago. It explains the idea of creating exposure to a share using options and how an option position can outperform an outright share position if managed correctly.

After all, what do you get by owing the share vs the option? There's no dividend, do you vote at AGMs and you can always convert to participate in any rights issue(s) without tying up a lot of capital.

If you follow good trading practice by progressively selling-down/buying-in when the share price falls/rises respectively to reduce/increase your exposure you actually mimic crudely the performance of a call option - might as well hold the option in the first place and let it do the work, it also bears repeating that you also know what your maximum downside is ;-)

Just one observation I would have liked to see the exercise price of the new options to be higher than the current market, say 30-35c - that would have added an incentive to HEG management to really create some additional value in the company and move the sp forward.