When youbuy company listed options on market, your research should tell you what theterms of the option are, ie expiry date and amount to be paid on conversion.With few exceptions these are constants. If a company splits their shares orconversely consolidates them the option price should be adjusted. Also, a newissue of shares may cause the exercise price of the options to be adjusted.When you purchase new options, the company will generally send you a conversionform for future conversion. This is NOT a demand for money just more or less acourtesy. I have noticed conversion of minimal shares, which I assume ashareholder might have mistaken it as a request for payment. You should now beable to decide whether to exercise or sell on market.
If you wishto sell these options on market, you obviously have the market quotes as yourguidance. Generally, the quote should reflect the company’s share price and theamount of the exercise price giving you the intrinsic value of the option andthere should be a premium to reflect the time value. However, over time youwill realise that common sense does not always prevail when dealing withoptions. When you spot these, it may be an opportunity to jump in; or it mayprove a pitfall that sucks you in.
I am notsure if this answers your question satisfactorily? As long as you realise thatyou have two ways to deal with your options you should be able to work outwhich is the best way to take.
W2
