options, page-8

kingo, don't forget your exercise price. You buy 1 option onmarket, pay the exercise price and you get 1 ordinary share.

So in your example, you buy 50,000 @ 5.4c. Say the exercise price is 12c, then you fill in the form which the registry sends you anytime before they expire in Jan 2013 and send it with your cheque for $6000 and you will get 50,000 ordinary shares. Total cost per share is 17.4c.

You can sell options the same way you bought them, but like I said above, check the liquidity. Sometimes there aren't many buyers.

If you do hold them until expiry and say the ordinary shares are 10c, so you're going to make a loss if you exercise them, you can let them lapse. You are not committed to pay that 12c, so your loss is limited to how much you paid for the options in the first place.