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Yes got some more today at 24c. They are very illiquid though....

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Stockrocker

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17/11/14

12:07

Post #: 14301183
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Originally posted by ZMan ↑

I have been looking at the value of the zip options, ZIPO exercisable at 30c by 1/12/2016.

Using the Black Scholes Calculator (many also available online) to value the options:

strike price: 0.30
stock price: 0.47
time (days): 757
volatilitiy (%): 100%
risk free interest rate (%): 6%
Gives a valuation of 31c, well above the current trading price.

Note: I normally use a risk free interest rate, as I value money in my pocket at this rate. I expect to get at least that return from any other investment I make with it. The interest rate is not overly significant in the calculation, a change of 2% only gives around 0.5c change in the valuation.

Volatility: Rates used are usually much lower, for example 30% for medium to large cap stocks. However this stock is and I expect will continue to be much more volatile than any other medium to large cap stock.
I have calculated the actual volatility from the share price history of ZIP, which gives a volatility of 160%.
Using a volatility of 160% in the calculation gives an option price of 38c, well above the current trading price, and not too far away from the stock price of 47c, so this seems too extreme.
Here is a sample of volatilites and calculated option prices:
40% 22c
60% 25c
80% 28c
100% 31c
120% 34c
140% 36c
160% 38c

Does anyone have personal knowledge of the volatility which should be used in valuing a volatily small cap stock like this?

Currently with the options trading at about half the share price, they seem to provide great leverage to any possible upside over the next 2 years. Also provide some risk management, if SP is below 30c in 2 years, simply dont exercise the option, thus providing less risk than other leveraged mechanisms such as a CFD or margin loan.

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Yes got some more today at 24c. They are very illiquid though. The way I see it is if ZIP is going to be hugely successful it will happen within 2 years. If you believe that in a worst case scenario the sp will be at least 55c in 2 years then options are a good leverage with limited downside.

ZIP Price at posting: 46.5¢ Sentiment: Buy Disclosure: Held
2 Upvote

0 Great analysis

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Last 0.3¢		Change 0.000(0.00%)		Mkt cap ! $3.246M

Open	High	Low	Value	Volume
0.0¢	0.0¢	0.0¢	$0	0

Buyers (Bids)

No.	Vol.	Price($)
12	13457151	0.3¢

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Price($)	Vol.	No.
0.4¢	12197609	10

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No.	Vol.	Price($)
12	13457151	0.003
17	11862472	0.002
7	13999950	0.001
0	0	0.000
0	0	0.000

Price($)	Vol.	No.
0.004	12197609	10
0.005	5706398	13
0.006	5910649	9
0.007	509874	2
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Yes got some more today at 24c. They are very illiquid though....

As Nvidia cools, we're looking to Aussie AI

Perseus Mining boosts stake in Predictive Discovery to 19.9% as latter's flagship project stalls

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Metallurgical testing shows saleable copper and pyrite from QMines' Develin Creek project

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Yes got some more today at 24c. They are very illiquid though....

Top Stories

As Nvidia cools, we're looking to Aussie AI

Perseus Mining boosts stake in Predictive Discovery to 19.9% as latter's flagship project stalls

Red Mountain Mining: record gold prices, two projects, two greenstone belts

HotCopper users blunt as Biotron sinks -35%; long-awaited COVID drug results same as placebo

Metallurgical testing shows saleable copper and pyrite from QMines' Develin Creek project

Week 36 Wrap: AI hype wave tested again; Oz per capita recession continues; AirTrunk’s $40B+ payday

Laramide sniffs prime Kazakh uranium, with agreement over 6000 square km land position

Shekel Brainweigh investor presentation webinar – the future of retail automation

Orthocell kicks off collagen-based dental bone repair product sales in Canada; eyeing next stop Brazil

CBA breaks trading record on strong day for Aussie financials

Featured News

Buyers (Bids)

Sellers (Offers)

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