Yes, the OPTIONS are free. You or I do not have the OPTION to...

Yes, the OPTIONS are free. You or I do not have the OPTION to buy 20M at 6c each at some time between now and June 30 2015. CN does. If and when she does exercise the option, she pays $1.2M to get the shares.

Basically there are 2 option plays.

One is to exercise the options at the best discount to market price and sell them straight up, i.e. wait for the sp to peak, then exercise and sell.

The other is to wait until the expiry date, investing cash elsewhere, then exercise at the last minute to increase holdings at a discount to market.

These are incentive options for CN to get the sp up to 6c and beyond. She has nothing to lose and everything to gain. The higher the sp, the more she gets. I think some have been a bit miffed at the low price of the options, thinking that hitting 6c is a fait compli. Considering these options were issued with the sp sub 3c, she needed to at least 2 bag the sp before she is in front.

The inherent value of the options package is given by the number of options * (current sp - option price). So the inherent value to CN at various share prices is

5.5c Nil
6.0c Nil
6.5c $100k
7.0c $200k
10c $800k
15c $1.8M

The dilution factorif they are exercised is

DF = (shares on issue + options exercised)/(shares on issue)-1
The total cost to shareholders if these options are exercised is
MC * DF minus #options exercised * option price.

This can also be expressed as a per share cost:
current SP * DF - (#options exercised * option price)/shares on issue.

At the current # shares on issue, the cost per share at various prices will be

6c Nil
6.5c .004c
7.0c .008c
10c .03c
15c .07c
30c .2c

Hey, if that's all it takes to give her the incentive to do whatever it takes to multibag the sp, I'm all for it.