3DAO Options, page-5

Yes, volatility is key - you can see this by studying a RIO versus ANZ exchange traded option as an example of higher/low volatility. The principle is essentially the same and you can see how the price varies according to whether the series is in the money, or of the money versus time to expiry. This is a really good exersize to get a feel for how the options market works. The other part of this equation is that your risk is limited to your buy price. If you buy the actual, you can in theory lose the lot while if you buy an option, the loss is limited - in this case a few cents. However your upside is unlimited. As 3DA oppies have a while to run there is a time premium that will be there for a while. Due to liquidity issues and no "bot" involved (as we see with the mainstream ETOs) the price can get out of whack to the parent - both up and down due and compounded by liquidity. As such, the price is very subject to supply/demand versus the ETOs where market makers use models like Black Scholes to set their spreads.