1. PEXO - from the Appendix 3B announcement, you can see that they cost 20c to exercise and will expire on Nov 30, 2010 ie next month. PEX last price was 9.1c, current ask price is 8.5, so next trade will be lower. As you would expect, no one is interested in the options. (If you check the market depth, you will see there are no sellers). Anyone holding those is going to have to cop a loss unless a great miracle happens in the next 6 weeks. Possibly what hummms means about not holding options in the last 12months before expiry, particularly if they're going to be out of the money. (I've never held these and don't follow PEX, just thought it was a good example).
2. AVBOB (I hold these). Exercise price 1.5c, expiry 30/4/2012. Last price 11.5c. AVB last traded at 14.5c. So by buying the options you can get AVB for 13c so the options are a cheaper entry for a longer term buy or, if you think the AVB share price is going to hold up, may be an arbitrage opportunity in the short term. And, for AVBOB there is a decent market depth, so you can buy or sell easily at the moment.
When you find a stock that you like, check if it has options and if it has, check the details & watch the depth and trades and you'll understand more. Some are good to buy, some are not. Some are easy to trade, some don't trade for days.
