DYOR. Not advice.
You need to take into account your own tolerance for risk and make your own investment decisions. The information presented here is based on the Black-Scholes Model ( for a general description see https://en.wikipedia.org/wiki/Black–Scholes_model ).
In a scenario where the company delivers on all their development goals in the next 12-22 months the options could prove to be very, very lucrative as suggested below. If the company fails in meeting key objectives or general market conditions remain very volatile, the options could prove to be a very risky investment.
Those warnings given, some fresh analysis on the options versus the heads, using Black Scholes. The follow key inputs have been used:
- Time to expiry: 688 days ( 1.88 years ) - 30 November 2020
- Number of heads: 1084.4M
- Number of options: 486.3M
- Strike price: $0.012
- Volatility 40% and risk-free return 4.27%
From this analysis the current premium on the options is $0.002. They have been heavily accumulated and they are tightly held. There is very limited liquidity currently (which adds to the risk). There has not been much trading volume in the heads recently and this usually translates to much less trading volume in the options. Options have an expiry date and depending on whether they are "in the money", this can significantly impact the liquidity in the months before expiry. Options are also a risk if a takeover occurs, since they may not be factored into a takeover offer ( you may need to exercise the options early ).
The first chart presents how with each $0.002 cent increase in the heads, the rate at which the options can be expected re-rate compared to the heads. This is the proportional change in the price of the heads compared with the proportional change in the price of the options for each $0.002 movement in the heads.
As it is a mathematical model, it is just an approximation. Actual movements will depend on market sentiment and trading activity.
You can see the much faster rate at which the options re-rate, particularly in the first 1 to 3c of movement in the price of the heads (as indicated by the model, which you must remember is only an approximation). There is no guarantee the options will rerate with this exact pattern.
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In the second chart, I look at a theoretical investment of $1000 invested in the heads at $0.007 versus $1000 invested in the options at $0.003. Based on the model, by the time the heads get to $0.103 the investment would be worth as follows:
- Heads @ $0.103 the $1,000 initial investment in heads is valued at $14,714 versus
- Options @ $0.0939 the $1,000 initial investment in options is valued at $31,309.
i.e. 13.71 bags on the heads versus 30.31 bags on the options.
This demonstrates the significant leverage potential of options.
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