@Kiwiboy00Yeah mate I’ll do my best layman’s terms for you.. and no you’re not a simpleton at all.. it took me ages to work them out.. there’s a lot of different words for the same meaning, ie like calling a car a vehicle as an example...
So what is an option?
At its most basic, an option gives you the right, but not the obligation to buy a fully paid ordinary share in a company at a contracted (strike) price before an expiry date that’s set by the company. This means you can either buy a share (convert/excercise) or not..
An option, by definition, does not rank equally with any other full paid ordinary shares in the company. This means that although it has value, there’s certain things you can’t use an option for, as an example, vote in company resolutions or trade them as fully paid ordinary shares..
What can you do with an option?
You can:
A) Decide to convert it (exercise your right) to a fully paid ordinary share (fpo), by paying the company the contracted (strike) price at any time before the expiry date. Once this transaction occurs, your option becomes a fully paid ordinary share, is added to the company share register and ranks equally with all others...
B) Decide you don’t want to convert it and do nothing. The option to purchase a fully paid ordinary share expires (lapses) on the expiry date and it is never added to the register..
C) Sell your option on market under a special ticker used to trade options to another buyer..
I’ll use your free OB options for examples of each of the above points:
A) Convert - The share price hits 15c and you decide to convert all your free options on 15 Jan 2021.. the conversion process means you pay 100,000 x 9c or $9000 to the company, the contract is completed and your options become fully paid ordinary shares worth 100,000 x 15c or $15000..
B) Don’t convert - The share price is 8c on 30 July 2021 and you decide it’s not worth paying 100,000 x 9c or $9000 to the company, as once they convert they become 100,000 x 8c fully paid ordinary shares..
C) Sell on market - The options were free and you decide to cash them in on market under the special ticker, on December 2 2020 the options price is 2c, you sell 100,000 x 2c and pocket $2000... or you decide to sell half 50,000 x 2c and pocket $1000, then convert the others..
My brain hurts now lol..
I haven’t gone into detail but I hope this clears it up a little for you mate..
(20min delay)