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I dont really understand how it gives you leverage. I understand...

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finlay422

40 Posts.

27/04/16

19:27

Post #: 17613317
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Originally posted by Upmarket ↑

Let's cut to the chase. You can buy CDVOA today for say 8c, which you must pay for in two days time. They have an exercise price of 15c and expire in Sept 2019.

You can sell them at any time on the market and receive payment two days later.

If you're still holding them when they expire in Set 2019, you must pay 15c to convert them to fully paid CDV shares.

Most of us are holding them have no intention of converting. We hold the options because of the leverage - if CDV appreciate, the return with the options is higher; likewise the loss is magnified if CDV fall.

They are attractive in this situation because they have relatively long life and the fully paid is already above 15c. If you believe the fully paid can reach 50c, then CDVOA should be worth at least 35c at that time.

There is no automatic pricing mechanism with options relative to the fully paids and hence the various opinions on what they should be worth at any given time.

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I dont really understand how it gives you leverage. I understand it is not a fixed ratio between the price of options and the stock price but if it stayed the same wouldnt you make the same profit by buying shares?

CDV Price at posting: 17.0¢ Sentiment: Buy Disclosure: Held
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