@ktb123
Nothing to be scared about at all...
Need to find out what the strike ( exercise) price is and the date due.
Trade the options like any share.. or lets say the fully-paids..
These "equity" options can be exercised at anytime up until expiry date.. by simply paying the strike price.. per share.. to the company..
In the case of KDR.. say heads trade at 60c.. the options have 15c to pay.. and so equilibrium price would be 45c..
In that option price + exercise price = current price for 1 KDR share.
Say i have $6,000.
1. I can buy 10, 000 KDR shares.
2. I can buy 10, 000 KDRO for $4,500.. ie same exposure but 1500 cash left in the bank for whatever.. or
3. I can buy 13, 333 KDRO and have greater exposure .. ie more leverage to KDR.
Remember this is good if the price goes up..
Percentage losses are increased on the way down.. as the initial investment is made on a 45c purchase instead of 60c
There is usually less liquidity in options as there r usually less in number on issue. There may also be a wider spread on bids/offer.. which can also cause some problems.
Hope that helps.. happy to answer any specific questions..
