One small correction - the options expire 2nd March 2018 I would...

One small correction - the options expire 2nd March 2018

I would also suggest that there is a difference between leverage - which is being able to buy more exposure to upside risk through purchasing more options than shares for the same amount invested - and gearing - which is typically used to describe borrowing money to buy more shares or options - and this is different again from the amount of your capital at risk.

(For example, a "short" position could potentially expose you to infinite risk and loss of more than your initial investment if you chose to short 88E and they DO announce a successful multi-billion-barrel discovery.)

Buying options certainly gives you more leverage than buying heads - but you aren't borrowing any money to buy them (no gearing) - so the most money you can "lose" on options is the total amount you invest. Same as with shares.

The options have a definite expiry date - 2nd March 2018 - so you must either sell them or convert them by that date or they become worthless. The cost to convert (a.k.a. the "strike price" is 2c). You can convert them at any time up to the expiry date - so you don't have to wait until the date if you want to convert them earlier.

On payment of the conversion amount (2c per option) - the company will issue you with ordinary shares (a.k.a. "heads"). At this point in time - as @numbersman states - your 12-month CGT-discount timer resets.

And 88E options are company-issued options - meaning that they are traded just like ordinary shares on the ASX - under the symbol 88EO (instead of 88E). You can buy and sell on market - and don't need any special license or trading account to trade them. You don't need to submit a 15-page questionnaire demonstrating your knowledge of the more complex "put" and "call" options you may have heard of. You can just buy and sell 88E Options - just like ordinary shares - only you can get more for the same money - just remember that they do expire.

The real risk with the options is that if for any reason things don't go to plan with the current IceWine #2 drill, then chances are that the heads will drop to about 1c - and options will therefore drop to zero. And the chances of options recovering between now and March next year are slim - as the company would need to permit and drill another well before they expire - and SP would probably not recover until the drill was successful - so the window for all this to happen is very tight. In other words - you would lose whatever you invested. Whereas with heads - you would "only" lose 80% of your investment.

One way to negotiate that risk is to only invest 80% of whatever amount you intend to risk here on options - you'll still get more exposure to upside than with heads - and if it all goes to custard, you haven't lost any more than you were prepared to risk - and you can invest the other 20% into heads then (assuming you still think the company has a bright future eventually).

e.g. With $10,000 to invest - you can buy 153K heads - or spend $8,000 on options and get 177K options.

Hope this helps