Iron ore price, page-104

Can someone explain to me how the options work?
I have a basic understanding but perhaps some clarification would help me better understand what the risk actually is.
Options at present i can buy for price of 0.003/option, now what does that actually mean?
Does that mean that i pay 0.003 now and if price reaches 0.07 the automatically get converted to shares?
How do i convert them to shares? is it instant and/or where do you convert them to shares in Comsec?
Also if price does not reach 0.07 what loss am i looking at? is it just the 0.003 i bought the options at?