chart - time to liquidate!, page-20

Yes B2

If I'd realised the options had just come on I might well have bought them instead. Although they are not that long dated and have 40c to pay and may well be worthless in the end (like the old ones) they look to be discounted at the current price. Again, undoubtedly the appearance of the options is putting temporary pressure on the share price (well, I hope temporary!) by providing an alternative avenue of investment.

I used to employ this strategy at one time years ago, actually seeking out companies which had options issued free but for a number of reasons gave it away -

1. Doesn't work to well in a bear market (eg EGO).
2. Often can't get enough to make it worth while.
3. I forgot about it.
4. You need to keep an up to date list of current/pending issues issues and have time to research the companies a little.
5. If you are not careful and forget to sell you end up with a big loss.

The reason the strategy can work is that when offered free the seller is eyeing a nice little profit and will sell at discount. As time goes by, if the share is at least firm there can be a window period in which the price of the option can then rise relative to the share until it reaches fair market value (they need to be long enough dated to allow this to happen before time decay withers the price back to zero - ie if BSG are 39c in Dec 04 you would have close 100% profit on the shares and 100% loss on the ops).

In summary I wouldn't buy them from the investment point of view, I'd buy the share, but the ops could be a good trade. I suppose this all goes without saying really but they are my thoughts on your suggestion for what they are worth... you also need to have a good feel for what constitutes a discounted price by comparing similar situations in the market - I used to have a cheater chart for that but now its lost and just tucked away in the residue of my brain.

pj