Hi taboon, basically an option is just that, an option! It is the option to buy the stock at the strike price on or before the expiry date (I think this is called an american option?? I could be wrong but I believe there is also a European option where the terms are different), which in this case is 10c. In the case of FDLOA, they expire on the 29 Sept, so any time up to, or I believe on, 29 Sept 08 you can hand over your options and pay 10c for FDL no matter what the price of FDL is at the time. Obviously it is not worth doing if he FPO (Fully Paid Ordinary) is trading below 10c.
The options are trading at a fairly hefty premium IMO but I think this bodes well for the stock... ie. people are keen to buy the option at higher prices to get more leverage to the stock. There is also essentially less risk in buying the options, Ie. if FDL were to go bust you can lose 5.9c or 12.5c depending what you hold. Then tehre is liquidity differences, so depending on your situation, I really couldn't say which one to buy, if any at all!
cheers
ps. I hold both.
FDL
flinders diamonds limited
