IMO, the options are undervalued by at least 0.5 cents.
I have set out below the way that I calculate value of options. I know there is a standard, but this is my method.
A) Firstly, the interest component. GPNOA are 3c cheaper than GPN atm, and the exercise price is 3c in 12 months' time. The cost of funding that 3c at margin loan rates is 3c x 8% for one year = 0.24 of a cent.
B) Depends on assessment of whether share price will increase. To use as an example, let's presume that we anticipate the sp being at 10.3c, that will be say an increase of 5c for both the shares and options.
But by buying the options at the present price of 2.3c, one could buy 2.3 times as many units as one could shares (ie., 5.3 divided by 2.3 = 2.3).
or by investing $10000 in options, you could purchase 434783 units; investing $10000 in shares would give you 188679 units.
to cash them in after the 5c increase, you would receive $31739.16 for the options (434783 x 7.3c), and $19433.94 (188679 x 10.3c).
what is the value of being able to buy 2.3 times as many units? that is up to the individual to determine, but my "seat of the pants" assessment is about 0.3c.
C. Add both components of premium together = 0.5c.
In other words, my current assessed value of the options is 2.8c (5.3c less exercise price 3c + premiums 0.5c)!
A cautionary word; I am a major holder of options, and may benefit from any increase obtained by buyers acting upon this information.
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