MLS issued 100m options (5c exercise price) to RMCaptial in 2006 as their underwrighting fee (we won't go into this part as it is not really important in the grand scheme of things).
MLS hit 10c last week and RMCapital decided to off load a significant portion of these to the market which everybody has been scambling to buy (we won't go into this part either as it is not really important in the grand scheme of things).
So how do they work? Well each option is a right to buy 1 MLS orinary share for 5c before September 2009. So if you buy 1 MLSOA today for 5c and you wish to turn it into a full share before the expiry date you would send 5c to MLS, then they would change your 1 MLSOA into 1 MLS. So for exa,mple say I have 10c in my pocket MLS was 10c today and MLSOA was trading at 5c today I could either buy 1 MLS share for 10c or 2 MLSOA for 10c. If MLS goes to 15c then MLSOA should go to about 10c each so my inital investment of 10c now equals 15c for buying MLS or 20c for buying MLSOA. (This is called the reward) The risk is that MLS goes down to less than 10c by the end of September 2009. For every 1c that MLS goes under 10c I loose 1c value on MLSOA so if MLS goes to 5c or less I loose it all (thats the risk). I'm sure we have all heard of risk v's reward and that is what MLSOA is all about. Are you willing to risk MLS going down less than it is today.
MLS Price at posting:
0.0¢ Sentiment: None Disclosure: Held
