in depth appraisal , page-14

Hello Tradersam

The question about the February options is short . . . unfortunately the answer is protracted.

Lets look at it from a strategic point of view.

For all of you who know exactly how company options work, you may want to skip the first part of this post (A)

(A) Firstly an option is a wasting asset, in this case a company option the value of which is dictated(technically) by the ordinary share price, any intrinsic value, and time value. Prevailing market conditions(emotion/liquidity) can over or under value the option at any given time.

BSOPM - ( Black Scholes option pricing model) is the universally accepted way of valueing what an option is worth. I'll let you Google it rather than give all the mind numbing detail here.

If there is no theoretical intrinsic value (the current share price is above the exercise price) the only value you have left is the time value.

The time value of an option diminishes at a parabolic rate as it moves towards its exercise date. So if the share price isn't rising far enough above the exercise price to compensate for the lost time value as in the current BLR case. . . .you may have to make some hard decisions within the next 8 weeks.

What does all this mean? . . . .for BLR

(B) A share price 4.6 cents hovering around its option exercise price 4.5 cents, with the expiry fast approaching is an options holders headache. Throw in the historical quiet trading period through to the middle of January, and it doesn't leave you much time to work out your strategy.

(1) Does he/she sell the options and hope to buy on market at a lower price?

(2) Does he/she decide to exercise, come hell or high water in the belief the company is headed for greatness, absorbing the cost for the price paid for the options added to the exercise price? At least the funds are going to the company and not somebody elses pocket.

(3) Do the little prays you say every night to the God of stockmarkets, come true . . . . and there is a meteoric rise in the share price with a week to spare.

(4) Does Mike Haynes show pity on the long suffering shareholders/optionholders and have a priority reissue roll over of the options, where current optionholders pay a token amount to extend the exercise date by a few years?
This would be the most preferred option I think.

A quick look at the number of optionholders and the quantity held from the annual report, suggests to me if the shareprice can't get above 5.5cents by end of January they will cave in and sell . . . .to either a insanely ballsy trader or someone who has cash on tap and fully intends to exercise . . . .to gain a guaranteed volume of shares. As you would know it can be very difficult to pick up the odd 20 000 000 shares in a single buy order of BLR without causing a stampede.

Does this answer your question Tradersam? . . . . .the answer for you is in there somewhere.

If BLR can't get over 5.5 cents by end of January, the options will be trading at around 0.3 to 0.1 cents IMO

Buyers will be calling all the shots!!!

SwissB