Share
6,739 Posts.
lightbulb Created with Sketch. 158
clock Created with Sketch. 19/01/18
16:09
Share
Originally posted by Aussierat
↑
Buying options versus Heads (Heads are fully paid shares) What is the difference between heads and options? – Option have an exercise date that the holder must sell the share on the market or exercise the option to buy heads before this date. There is an exercise price for each option (example 1.5c)What is the exercise date: 30th March 2019What happens at 30th March 2019: Any shares not sold or exercised will be worth nothing after this date.What does exercise means: Exercise means pay the exercise price to the company (1.5c as per example) per share before closing date.What is the total cost: Your initial investment price to buy the share on the market (1c) and the exercise price 30th March 2019 is 1.5c = 2.5c per share Can I buy the share on the market at 1c and sell if the options reach 2c in a month or two: Yes, you can trade the option on the market the same as heads up to the exercise date March 30 2019. You do not need to exercise the share to get the value.Why do traders buy heads: The option normally trade at 50% discount to the heads, therefore by buying options you hold more shares for your dollar spent. This adds value if you are buying a share at today value and exercising the option to change to heads in the future. Also as the option reaches the exercise price (as the heads go up) the 50% gap between the options and heads lessons.Example XPE earlier this year WHY IS THIS ACHIEVABLE? IN THE MONEY
Expand
I managed to buy CTMOAs at the end there @ 0.002. I like VonTraders logic around the risk reward regarding the leverage vs the safer CTMOBs, but thought I'd missed the chance at 0.002 yesterday by the time I got moving.
(20min delay)