vilo options, page-87

Correct, to a point.

Although we're talking about listed options here (tradable on the ASX just like a share), this booklet from the ASX : http://www.asx.com.au/products/pdf/UnderstandingOptions.pdf

provides a good introduction to options and how they are priced. There's two components to the value of an option, 'intrinsic value' and 'time value'.

Time value in an option falls away as two things happen
1) The option gets close to expiry (it falls away exponentially)
2) the share price exceeds the option strike price (it falls away as the option becomes further 'in the money'

As the strike price is 10c, and VIL is still trading below 5c, VILO at the moment is ALL time value. Obviously this value will fall further as we get closer to June, but it's offset by the intrinsic value.

Intrinsic (often called 'real') value in an option increases for every cent the share price increases over the strike price. Though there's a beta value that determines by how much the option will increase for each increment of the sahre price it's best to keep things simple. If VIL is 12c at expiry then the real value of the option will be 2c.

If VIL is 12c with 4 months to go before expiry, the option will be driven by two components - both time and intrinsic value, so it it will be roughly 2.5-2.6c which reflects the 2c in real value plus a bit more for the remaining 4 months left for the share to potentially increase further in value.

Hope this helps somewhat. But it's more useful to look at various educational resources rather than someone's opinion on a forum. :)