WMLOB and WMLOC options, page-7

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2040

26/07/21

17:44

Post #: 54784539
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Originally posted by longskew: ↑

thanks for sharing your research Disclosure, but i might add some points of caution for everyone, especially those new to options like yourself.

black scholes doesn't work at this end of the market where it's pretty much impossible to price the key input - volatility. i would very firmly advise against trying to justify a price using this method here. further, its a company option (only calls on the two strikes/expiries) so the model falls apart more since there's no way to hedge (buying puts/shorting stock) so the arbitrage component is irrelevant. you aren't trading volatility here, you're just straight punting the delta. options are a complex business, but this type of option trading is a pretty simple game.

at the current price you're paying a pretty large premium - i would say it's relatively too expensive given the lack of liquidity that should discount it further, and the fact that your upside convexity only really realises after a large move, rather than early in the move. at a 3c strike, paying 1c for the WMLOB where it closed you need the stock to be 4c just to break even if you hold through, and that premium you pay will decay as it goes into the money and closer to expiry, and even flip negative as there is the added element of conversion risk (the time between converting and settlement, as well as the capital required to convert). you'd be much better off just putting that premium in up front to buying the stock at the current price.

these kind of options are typically used as a way to get some leverage into the stock - you can buy more units for the same amount of capital, and as they go into the money your delta goes to 1 (in tick terms - every tick the stock goes up, your option will go up as well but will be a higher percentage due to the lower price). however given all of the above, this trade isn't a high value trade at the current level imo. also need to remember they were given out as free options...

don't get me wrong, i'm very bullish WML and even got filled some more near the close this afternoon at 2.2, but relatively speaking the options are not a great price to buy it at. (note that doesn't mean i think you'll lose by buying them)

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Thanks for the note @longskew - certainly hear and understand your commentary on various fronts, and as noted from the outset the post was intended in effect as a place for discussion of the listed WML options and concepts generally, and without giving any buy, hold or sell advice at the current levels offered or otherwise (with various express caveats given with respect to risk)!

Each to their own strategies / investment decisions of course - personally company options have worked well for me in the past (i.e I am not new to them).

Very best to you.

WML Price at posting: 2.2¢ Sentiment: Buy Disclosure: Held
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(20min delay)
Last 0.2¢		Change 0.000(0.00%)		Mkt cap ! $4.333M

Open	High	Low	Value	Volume
0.0¢	0.0¢	0.0¢	$0	0

Buyers (Bids)

No.	Vol.	Price($)
1	970992	0.2¢

Sellers (Offers)

Price($)	Vol.	No.
0.3¢	43637517	27

View Market Depth

No.	Vol.	Price($)
1	970992	0.002
32	82474898	0.001
0	0	0.000
0	0	0.000
0	0	0.000

Price($)	Vol.	No.
0.003	43637517	27
0.004	19475825	19
0.005	9476568	7
0.006	3525265	2
0.007	4000000	1

Last trade - 16.12pm 11/11/2024 (20 minute delay)

WML (ASX) Chart

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WMLOB and WMLOC options, page-7

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WMLOB and WMLOC options, page-7

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