Hi Exberliner1,Nice post and thank you for that explanation. I...

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20/06/19

21:13

Post #: 39162793
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Originally posted by exberliner1: ↑

Each option gives you the right to buy 1 share from IHL directly at a cost of 4c per share. The option expires in September next year, on expiry your right to buy one share for 4c disappears and the option ceases to exist.

It is irrelevant what the underlying share price is doing as you have the right to buy one share for 4c.

Longer dated options end up with a time premium in their market price based upon market supply and demand which is why IHLOB is trading at 1.4c when IHL has not yet reached the strike price.

If your timing is good options can provide excellent leverage. For example I bought 7mn options at an average of 0.0052, for the same money I could have bought just 2mn shares. I now have the benefit of upside on 7mn units not 2mn. Of course this can work aganst you, if the SP falls then the options will fall in value quicker than the shares and may suffer from a lack of liquidity on the way down trapping holders with a largely worthless position. With IHL though this is not an issue as I am well ahead.

Once the SP goes above the strike price of 4c then the options should start going up roughly 1:1 with the the shares so a 1c increase in the shares should also produce a 1c increase in the options, although that is down to market participants trading them and is not always the case leading to arbitrage opportunities.

So when IHL reaches 10c per share on the heads I would expect the OBs to be trading around the 7c -7.2c range giving you much bigger upside from current levels.

Everyone has probably already noticed that though as there were only 355k options on offer in total in depth at today's close.

Hope that helps.

EB

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Hi Exberliner1,

Nice post and thank you for that explanation. I to am a real novice on options, 1st time buying options here in fact.

May I ask and please forgive me if you and everyone may know the answer, but, for one more explanation on what you mean by “each option gives the right to buy 1 share” As obvious as this may sound, how does someone buy shares from options? I hold 3.6m options.

Apologies if this may sound like a real novice q, just thought I’d ask considering Westpac trading brokers are clueless..

IHL Price at posting: 3.7¢ Sentiment: Buy Disclosure: Held
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Hi Exberliner1,Nice post and thank you for that explanation. I...

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