There are formaula you can obtain from the ASX websites, and brokers
Essentially the price is combination of
1 Strike price 3c 2. Time value - Time remaining to reach or exceed strike 3. Volatility in the SP
When the Heads went below 3c, there was also high volatility and plenty of time value. This means they were essentially valued by these things
Of late the oppies are deep in the money, and hold good value. However the Head price has been very flat. This reduced volitily, so as a result the oppy price feel toward par value.
You will note as soon as heads volume and volatility increased over the last few days, the oppies started to rebuild a time premium over the combined strick and head price
Summary - The oppies have been extremely cheap, creating an opportunity for people to switch from heads, and or increase holdings with nice leverage
Just need the DFS
Remember, this also works in reverse, should things turn sour ( I hope not )
Sorry for the ramble. I am sure there is an explaination on the net somewhere
PEN Price at posting:
8.2¢ Sentiment: Hold Disclosure: Held
