Firstly you have to look at the reason for buying the options as to buying the full shares.
The key reason for buying options like ctpoa is that they offer greater leverage allowing you to get more bang for your buck, or they allow you to conserve capital whilst getting the same exposure to he stock.
The downside is that these options have a inherent risk of becoming worthless if they do not reach their strike price before they expire.
The premium you pay for this leverage is often refered to as the "time value" of the option, options also have an intrinsic value which reflects how much in the money the option is.
Using CTPOA as an example, it has a strike price of 25c expiring 30/6/09:
on the 30th of june the options value will be worth only it's intrinsic value (unless of course someone sells it for less which does happen on occasion). If the share price of ctp at that time is 30c then ctpoa will have an intrinsic value of 5c - if the owner then wants to convert the option to a share they pay the company 25c (the strike price).
If the ctp share price is less than the strike price at that time (eg 20cents) it would cost more money to convert the option into a share than it would cost to buy it on the market which would be silly, hence the option becomes worthless.
The time value is not as easy to calculate as it reflects the perceived risk to the holder of the option expiring worthless, balanced against the positive leverage it can offer.
The longer the time to expiry the more chance of the share price reaching the strike price of the option and hence less perceived risk. When our bad announcement came out suggesting no drilling may be possible this quarter ctpoa plummeted whilst ctpo was far more robust since it has years before expiry compared to months with ctpoa.
The risk of the option expiring worthless is also reflected by the current shareprice.eg If ctp is trading at 24cents at present then their is less perceived risk to the option holder hence they would be more likely to pay more for the option. If the shareprice is trading far from the strike price their is a higher risk to the option holder as there is further for the shareprice to travel to get "into the money"
this is he reason why he options price tends to follow the direction of the share price. But be wary of assuming that the options price will be the same each time the shareprice hits a certain level as the amount of time left (and hence risk) may be different.
When the option is "in the money" it should go up and down equally with the share price in the short term. Eg an increase in ctp from 30c to 42c should result in ctpoa going up by 12 cents. But over a longer period of time this price relationship may not be precise as the time value of the options change. Also as the option gets "deeper" into to money the premium to buy the option drops as there is less incentive to buy as they may not offer enough leverage to negate the risks.
Hope this helps.
CTP Price at posting:
14.3¢ Sentiment: Buy Disclosure: Held
