Maybe I should be the one to explain as I was guilty of purchasing RRSOA today and running the price a little.
Of course to buy them in any sort of size, one needs to run them up.
Now At 50 cents, a lazy $25000 could buy 50,000 heads. At 29 cents, the same money can buy around 78,000 options
I have a view that the company is going to run strongly. (I could be wrong of course)
Now by option expiry (Oct 2010) we could be looking at $5 or even $10 for the heads.
The 50,000 heads would then be worth $250,000 or $500,000
On the other hand, The RRSOA's would be worth $312,000 or $702,000
The options return an excess profit over the heads of $62,000 @ $5 or $202,000 @ $10
It's called leverage!
And if I am wrong, I think it will be regard to the potential upside, and the time frames involved. I expect to see a lot of action well before 2010.
And if the options could be purchased closer to 20 cents than 30 cents, then that would have been even better, but I am impatient as we get close to lift off, and couldn't bear to stand in the queue.
Hope this helps.
Cheers Nev
RRS Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
