Friday's options exercise no threat to share price - the opposite given expectations?, page-9

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SA1588

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27/01/21

13:44

Post #: 50470817
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Originally posted by bedger: ↑

Honestly, the options treatment is delta based. Its an area of greyness with companies and ASIC, because most companies and regulators do not understand the complicated mechanics of options and look to the market for how to price. For example most international accounting rules including Australia insist them reflected on the balance sheet now. The reality is a Black and Scholes pricing model (the standard and hallmark of options pricing) assumes arbitrage opportunities. Those arbitrage opportunities do not exist in employee stock options and as hopefully my indication above indicated they are very binary - in the past those forgone options were actually employee held.

Its complicated, but in a normal stock options market you would only exercise a call on expiry or before a big dividend if it was deep in the money. You would sell the option and always gain more from the market in the selling of the 'extrinsic' value (time value) on top of any intrinsic, rather than foregoing the extrinsic value. Employees do not have this option - unless they went to a big Insto and arranged an OTC transaction. So the options become binary - those options you mentioned were in the money at the end of 2019 and the employees never exercised.

I think this is a lot to do with why this 'cashless exercice' scheme has probably been brought in. It replicates the market better in that the employees don't have to wait until expiry or find collateral and sell into the market. Its all an evolving area.

More importantly for our purposes, irrespective of the fine details, given the natural risk averseness of employees and the scheme, we are never likely to see swathes of employee share options sold just before expiry and a load of leveraged employee shares hit the market and push the price down.

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"....allyou need to know is the Directors and employees who received 3,370,525 shares asof Friday from the exercise of 10,800,000 May 2021 options with an exerciseprice of $0.395..."

Does this mean OCC was deprived of 10,800,000*$0.395 = $4.266m of cash from the exercise of the options?

Notwithstanding, I agree shareholders are better off with this approach.

OCC Price at posting: 53.5¢ Sentiment: Buy Disclosure: Held
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Last $1.24		Change 0.005(0.41%)		Mkt cap ! $302.3M

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Friday's options exercise no threat to share price - the opposite given expectations?, page-9

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Friday's options exercise no threat to share price - the opposite given expectations?, page-9

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