PMYO conversion, page-19

Here is a quick summary. Listed options are “call options” that give you the right, but not the obligation to convert the option into ordinary shares by the expiry date. The conversion cost is specific to the option as is the expiry date.

Basically it’s a form of leverage because the options trade at a discount to the ordinary shares. Option pricing is more volatile, and there is a risk that they will expire worthless if the ordinary shares are valued less than the conversion price at the expiry date.

Typically option price + exercise price trades at a premium to the ordinary shares due to the leverege. This is the time value of options. As you get closer to the expiry date the time value diminishes and the options tends to closely follow the ordinary share price less the conversion price.

Hope this help. Check the ASX website it has some good information about how options work.