Simple math will explain why buying options COULD be better than buying head shares (HS)
Example: Choice of 1000000 [email protected] or 333,333 HS @7.2c. Both of these options will cost $24k.
Options therefore cost 1/3 of the HS for the same number of shares.
If HS shares are less than 8.9c by 2019 then the options can be converted @6.5c but there is no profit (plus the opportunity cost of holding) If the HS is less than 6.5c in 2019 then the option holder does dough to the tune of $24000. That's the option downside.
The upside is that if the HS moves to above 8.9c. For example say 20c
option holder profit is 20c - 8.9c = 11.1c x 1000000 = $111,000
HS holder profit is 20c - 7.2c = 12.8c x 333333 = $42,666
Obviously the higher the price of the HS the bigger the profit for the option holder.
Also, option holders can sell the "rights" anytime before the conversion date.
So its all about confidence that the HS price will be way beyond 6.5c in 2019, and the further beyond that price the better the financial outcome for the option holder
MXC Price at posting:
7.1¢ Sentiment: None Disclosure: Held
