Like to be confused? Read on lol!
The three letter code of GDO, refers to ordinary shares.
The four letter code of GDOO, refers to company options.
What are company options?
They provide the right without the obligation to turn the option into an ordinary share, by paying a strike(or excise) price.
Do they last forever?
No, they have an expiry date.
For example. (using rough numbers)
GDO ordinary share price, 35c
GDOO company option price, 15c.
Strike price for these options is 50c.
Expiry, October 2012.
Therefore to turn the GDOO option into an ordinary share, you pay 50c per share.
You might wonder why you would buy an option for 15c and then pay 50c to turn it into a 35c ordinary share?
See below,
Pros
Leveraged reward, able to purchase more options per $
Expiry, time till expiry allow share price to appreciate.
Cons
Liquidity, significant issue
Expiry, options may become worthless
Leveraged Risk
Having to write out large chqs when exercising!
Hope this helps!
Mav
Like to be confused? Read on lol!The three letter code of GDO,...
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