and you would use the difference up in brokerage
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I think the ord would have to get over $1.45ish for the options to start moving, the 12 week term is so small, we know if it were say 12 months to expirey the options would be close to 35c!
I think the options will move if the heads hold when they go ex-div... at the moment the real price of the heads is 138-5=133 with many punters probably expecting a drop off after the divvie... however, if the ex-div price holds in the 130's the suddenly options are looking far more attractive with 12'ish weeks to run....
Worth noting that with all this talk of the sp reaching $1.50 to convert options, any option that has been purchased (ranging from 4-32c) with need to reach $1.54-$1.82....
Not sure what % have been traded, but my guess would be that NZO would have to be $1.60 to result in majority conversion.
Sticking with my prediction of a month ago... NZO @ $1.50 on expiry.
When it comes to option expiry date the price paid for the option is irrellevent - its a sunk cost - it doesn't matter wether you have paid 4c or 30c for them - all that matters in determining wether or not options are exercised is the price of the heads - if it's over $1.50 then options will be exercised
ex div on asx effective cob friday march 28
M
minge.......
without getting too technical and picking on brokerage charges, interest otherwise accrued etc, there is no point in converting options if its less than $1.50. As Mick has pointed out, whether you paid 4 or 30 cps for the options it has no bearing what so ever. You would simply let them lapse and buy heads only if you see fit. The buying of heads is a seperate issue from your decsion of when a person originally brought the options.
The options thing is actually very simple. Its either in the money or they are not. The decision to convert should not be influenced at all no matter whether you paid 0.001 per otion or $1.00 per option.
Again without trying to get too technical, 1 significant reason would be to convert options if less than $1.50. That is, if you had such a swag of options, eg 5 - 15,000,000 of them. By converting at below $1.50 may be a very good decision as buying heads with that quantity might signiiificantly push the sp over $1.50
watch this space to see if any crazy buying of options occur espescially in the last couple of weeks if the sp is anywhere between $1.35 and $1.50. Its a good way for someone to sneak in the back door.
Minge, your analysis is actually not quite correct. The moment an option is in the money, ie trades above $1.50 in this case, you are obviously going to exercise, whether you bought the OD's at 1cent or $1.
Here's why.
If I pay 1 cent for the option, I'm clearly going to exercise if the stock is trading above $1.50...probably don't need to explain that one.
If I pay $1, then yes, my breakeven is $2.50, BUT, let's say the stock is trading at $1.60. My cash outlay on the options so far is $1. So if I do nothing my loss is $1. If I exercise, pay $1.50, and then sell my new heads at $1.60, my cash outlay is $2.50 but I get $1.60 back, so my loss is only $0.90.
In short, you should always exercise any options that are [I]in the money[I] at expiry.