Mostly because a lot of people come here for information and there's a lot of misinformation, and pumping, downramping etc. I thought it would be best to lay out a factsheet. I could discuss call and put options and their differences but for simplicity I'll refer to the Call Option known as SRNOC, and lay out essential information that I see asked on the daily.
Typically the way in which you'd exercise an option is to call the share registry that the company is utilizing (For the case of SRN, it is Advanced Share Registry Services). You will provide them your HIN, and they will send you out a form to fill out and send back to them. This would include how many you wish to exercise, and your details, etc. As well as paying for them to exercise these options, it will only be done after payment is cleared.
So currently as of writing this post. SRNOC is trading at $0.022 while the strike price or cost to exercise this option (turn it into the underlying security - SRN) is $0.006. While the security itself, SRN, is trading at $0.042. Meaning if I had 100,000 Shares of SRNOC (equivalent to $2,200), I would need to pay $600 to exercise these options for a 1:1 ratio of conversion. Meaning those 100,000 Shares of SRNOC become SRN (equivalent to $4,200). It would be correct in saying that you would have made around $1,400 currently with their disparity.
But there are many reasons as to why there is a gap;
- The Option is actually a Bermuda Option. This is a hybrid style option that sits somewhere between how a European Option is traded and how an American Option is traded. This doesn't mean that your money is going to be lost in some supernatural triangle, it means that Options can only be exercised at explicitly set dates. In the case of SRNOC, after November 25th, the applicant can send their details to begin the process to exercise their holding. But the Company has chosen to exercise at the end of each quarter (End of; December, March, June, September). This means that the earliest you will see your new securities enter your account is in January (1-2 weeks after the end of the quarter).
- Additional cost misinformation; I can say with certainty that there is no further or additional cost beyond the strike price per share. These further costs are taken on by the Company. There's also some misinformation and confusion on the language used and people thinking you cannot exercise if you have less than 500,000 shares. This is untrue. The only caveat is that you must exercise your entire holding if you plan to exercise a parcel of less than 500,000 shares. Meaning if I have 420,000, I can't choose to exercise half now and half later, I must exercise them all. However if I had 800,000; I could choose to exercise 500,000 now (or all of it), and do the rest later.
- SRNOC is very diluted, there are currently 613,153,640 shares, compared to the current SOI of the company; 730,278,640. As seen in the latest Appendix 2A issued by the Company. If a large volume of Shares are exercised then consequently sold; it could mean that the underlying security is brought down considerably in a sell-off considering this can only happen each quarter.
I hope this helps.
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