Pretty straight forward: An option can be bought or sold. It gives you the right but not the obligation to buy a share on or before the strike date at the strike price.
So, you are holding the option to buy at the strike price and you add the price you pay for the option to work out what your cost for the heads will be. Typically, you buy options for leverage. KAI are at 4.1 cents and the options are at 2.5 cents. if you had $1000 to invest, you would get approx 25k of shares or 40k of options. Once the options are in the money (the strike price is higher than the share price) they should follow the share price cent for cent - they don't have to, but realistically that is how it should work. In our scenario, should the share price go to, say 25 cents, the options should go to 22.5 cents as the strike price is 2.5 cents.
Thus the potential gain in the scenario above is $5000 on the heads (25k x 21 cents) against &8000 (40K x 20 cents).
The risk is greater, if the heads go down, the options can be effectively worthless and unsaleable - you can ;lose all your money.
I have made some very good money oon options over the years and lost a few thousands heere and there.
KAI Price at posting:
4.1¢ Sentiment: Buy Disclosure: Held
