usually this subject is often well covered and it maybe hidden for those who don't have much time. I get to see HC and read about 5% of posts nowadays and im very sad about that. Some could say there is too much dribble and I may not argue that point.
options are just a form of raising money for future needs and to make sweeteners for sophisticated investors. maybe they got to buy there shares at 2 cents when they were 2.5 cents and got a free option? I understand the 10 cents ones are not available to us at all and were for our new investor who funded 13 million for drilling starting December.
options have many additional potential dangers and have a time value which is also complex. this point would not be relevant with AVZO IMO as its far out at May 20. But as options get closer to expiry, they can become much more volatile and will lose value fast as time diminishes. certainly if they are not in the money. As some one said recently on HC, the exit door is smaller and we all can easily note that liquidity is not as high. You gain additional leverage especially at the lower prices than now, although now, it still has leverage of course. this leverage helps you to make more money or lose more. in this case, where the buy strength is there and a sentiment of a looming takeover which are usually in the 20 to 60% depending on market forces and need (we have strong fundamentals on all facets of this stock that suit Chinese). If however, the Chinese played a harder game and shorted etc then people get impatient and SP could tumble; and thus options would provide a greater loss. However, its hard to think that they really can play games too much and they wont want to see anymore drill results which of cause add value to a JORC. Its hard buying here now when I bought last at 13.5 for heads and then see them down to 9. But as time passes and new values seem normal and your confidence and research increase, then you reassess to buy more with what has huge potential. this is contrary to the guys who like to free-carry. Im finding it hard not to buy more but I already hold a substantial amount of both heads and options. Tax planning tonight is doing my head in. No 50 CGT discount seems likely. I often ask myself If im ready to sell at this price or feel confident of a greater price? If the answer is yes to holding then I ask why I wouldn't add further to it? A great analogy for this is
"An old fable tells of a man walking alone through the desert when suddenly he heard a voice say, "Fill your pockets with pebbles and tomorrow you will be both glad and sad."
Curiously the man began to pick up pebbles and put them into his pockets. As soon as he awoke the next morning, the man reached into his pockets to find the pebbles had turned into diamonds, rubies and emeralds. Just as he had been told, the man was both glad and sad. He was glad for the jewels he now had but sad that he had not collected more pebbles."
back to options. why are they often trading with a 3 cent or mostly greater price difference creating a arbitrage ? I understand the Chinese can and do trade options in Australia and this is contrary to posts a few months back. However, they are less likely too and the typical Chinese investor would focus more on heads and thus we see the regular arbitrage. If this is a TO soon then options are in my view the preferred new entry for additional funds. Would I sell heads to buy options now? Not really, as the value increase may not be so vast but you are resetting your 12 month clock for CGT and thus it depends on how recent you entered. maybe we get half way through a drilling for JORC 2012 and some of my shares will certainly be held for 12 months.
Would I buy options to convert quickly? To me, that's crazy, but so many are doing this. Why? for a 1 cent or 2 of arbitrage? this can disappear quite quick and whilst conversion's are occurring weekly. this is not typical. even advance share registry say it is 15 working days by memory and that's 3 weeks. the time starts ticking once the funds are cleared. So that could be 3.5 weeks but as we know, they are doing it very quickly now.
why wouldn't I convert? I lose control of the shares for this period. Why would I want to throw 3 cents at each share to lower my leverage for? Could I use that 3 cents to just buy more options and gain a far greater profit and leverage? of course, that's what I would do.
So if I have the money to convert, then why should I not use that to increase my holding instead?
Its said that a take over is very likely, this I will get 3 cents less for my options than heads. Its not really too difficult
![Big Grin](styles/default/xenforo/clear.png)
![Cool](styles/default/xenforo/clear.png)
its all in my opinion and please do your own research as winners are not funded by winners but rather losers. Just like casino's don't make there product so flashy from winners.