This is what you need to consider when buying IMUOD's
Say you want to buy $14000 worth of IMU's and are choosing whether to invest that sum in either fullies or oppies. Say you decide to buy the IMUOD's and then suppose just before the oppies expire and you need to exercise them ... the IMU share price hits 60c. The following maths comparing buying either fullies or oppies applies:
Fullies:
100,000 x .14 = $14,000 costs
100,000 x .60 = $60,000 less $14,000 gives a net profit of $36,000
Oppies:
350,000 x .04 = $14,000 + conversion @ .45 per option which amounts to $157,500 = a Total cost of $171.500
350,000 x .60 = $210,000 less $171,500 costs gives a net profit of $38,000.
Things get interesting if the SP hits $1.00 just before oppies expiration:
Fullies:
100,000 less $14,000 = $86,000 profit
Oppies:
350,000 less 171,500 = $178,500 profit..
In other words, 60c is very close to break even with the oppies on buying $14,000 worth right now. The risk you take is that if the SP at the time of oppies expiration is below .60c ... you stand to lose money. If the IMU share price is below .45c at time of expiration then you can kiss your oppies good-bye as it will be cheaper to buy on market than exercise them.
Anyway ... this is a thumbnail sketch on how to work out whether oppies meet your risk profile.
Have a great weekend!
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