Just to help fill in a few blanks for you regarding options and what happens when they expire..
while the share price is lower than the conversion (strike) price of the options, they can be hard to value and usually trade for fairly low prices since the cost of the option plus the conversion would result in a share that cost more than if you just bought it on market. People buying options when the shares are below the strike price are getting cheap options with lots of leverage and taking on the risk that they could end up worthless if the share price doesn't end up higher than the conversion price before they expire.
Once the share price is higher than the strike price, the price of the options generally track roughly in line with the share price. ie: if the shares go up 1c the options typically follow and go up 1c too. Since you can buy more options than shares for the same amount of money, once they are tracking in line this way the larger number of options means more 1c gains than you would get if you had a lower number of shares (leverage)
When there is a long time left until expiry, this leverage is useful and people will generally pay a little more than just the options price plus conversion price to take advantage of the leverage. This is known as the 'time premium'. This happens when there is lots of time left before expiry because options buyers are mostly buying more for the leverage than for the intention of converting to shares. (eg: when shares are 2c, options with strike price of 1c will usually trade for more than just 1c.. you might find they trade for 1.2c/1.3c)
As expiry gets closer, the premium usually fades away. Those who held options for the leverage either sell out and take their profits or convert them to shares if they intend to stay invested. The buyers who are buying the shares as expiry gets closer would usually be planning to pay up the strike price and convert them before they expire rather than using them for leverage. These buyers wont want to pay any kind of premium and would be more inclined to buy them for a discount (eg: when shares are 2c the options with a 1c strike price close to expiry will rarely sell for more than 1c, and more likely under 1c).
This discount as expiry gets closer can sometimes be an opportunity to grab cheaper shares than you can buy on market. If they expiry, they are no good to the holder, so selling at a discount can be their only option. In some cases, the discount can be due to options holders who want to convert to shares but don't have enough spare cash, so they may sell some of their options on market to raise the cash to convert the remainder.
If the share price is still below the strike price when the options expire, you usually cant give them away and have to just watch them expire. Providing the strike price is less than the share price, you will usually be able to sell them off right up to the last few days even if its at a discount.
hope that helps make some sense of it!
MLS Price at posting:
0.6¢ Sentiment: Buy Disclosure: Held
