To try and help you understand, RDNOA has a price of 1.5c. It’s basically a guarantee to say you can buy the shares for 1.5c. You have until November 2024 to choose if you want to buy it or not (that’s why they are called options).
However, you have to pay for that guarantee. So someone might say, pay be 1.2c now, and I’ll give you the option to buy the shares at 1.5c anytime between now and Novemberif 2024.
Because the option had a fixed price of 1.5c, the price someone will sell you that option will usually be 1c - 1.5c behind whatever the value of the share is at that time.
If the share is currently trading at 3c, then someone would sell you the option usually around 2c, so you pay 2c for the option to later buy the shares at 1.5c.
if you choose to exercise the option (buy the shares) then you’ve basically paid 3.5c for each share. So if the price of the share is only worth 1c by November 2024, then you wouldn’t bother paying the 1.5c, in which case you’ve lost the money you paid for the guaranteed price.
So when you buy these options, you’re hoping that the price of the share lane by November 2024 will be more than the gaurentee you paid for plus the price to buy the options (in my example, more then 3.5c).
You might ask why someone would do this?
firstly, because it can allow you access to more potential shares without having the capital up front.
for example if you bought 1mil options for 1.2c l, it would cost you $12,000 at the time. If you wanted to instead buy 1mil shares at the same time you’d have to have maybe $27,000 (assuming a stock price of 2.7c).
You can also trade the options you bought which can also be good.
For simplicity of numbers, say the share price is 2c and the option price is 1c. You buy 1mil options for $10k. If the share price goes to 3c, the option might be worth 2c, so you’ve doubled your investment, you sell them for 2c each and you’ve made $10k.
If you instead bought 1mil shares at 2c, it would cost you $20k. If the share price goes to 3c, you can then sell them for $30k, so you’ve only made 1/3 of your investment back.
However, with options, the guarantee expires. Meaning after that date, you have nothing if you don’t convert them to shares. You’ve lost that initial $10k you put in and you don’t own a single share.
If you bought the shares, you’d have spent $20k, and even if the price drops to 1c, at least you still have $10k worth of shares you can sell.
hope this makes sense. (Please someone correct me if I’m wrong, I only had it explained to me a couple days ago but I’m pretty sure I understand the concept).
I bought 1mil RDNO shares at 0.3c, which cost me $3000. They expire in December this year and have a “guarantee” price of 4c each. If the price doesn’t get to 4.3c by December, then I won’t pay the 4c and I’ll lost my $3000, but I bought them knowing it was a risk and I was happy to lose that $3000 if it didn’t go well.
however, if the price happens to be at 10c by December, I can either try to sell the options for maybe 5.5c each, for a total of $55,000, otherwise, if I think the price will continue up, I would have to them pay $40,000 to convert the 1mil options into shares at 4c each. I could then sell them for 10c a share for $100,000 or keep holding them in the hopes they go up more.
in both scenarios there I’ve made about the same profit but I’ve had to risk a lot less.
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