Hi All,
There has been a few references to the MLS options recently, so I thought I would pull together a table to compare and help explain both how they work and and the leverage available at current prices.
MLSO Strike/Exercise price is 0.3c (The cost of converting it to a share)
MLSOA, Strike/Exercise price is 1c (The cost of converting it to a share)
Firstly, a few assumptions;
1. I have taken the starting share price as of what is currently expected to be on the supply side at open (i.e. if you were to buy in now, that's your price paid)
2. Starting capital of $1,000 (scale to suit your personal circumstances) and the starting shares is reflective of that capital divided by share price.
3. MLSO and MLSOA are currently not in accordance with their respective strike prices, MLSO is trading at a 0.001 discount, and MLSOA is trading at a premium, reflective of the future potential leverage, explained below.
4. I have made assumptions as to how the share prices on options will play out as they eventually fall into line with heads at the appropriate strike distance over time, I have tried to be fair in favour of MLSOA trading at a premium until 1.6c herads.
As you can see form the table below, the MLSO and MLSOA shares are properly priced when the cell is green, slightly mispriced at yellow, and very mispriced at red (I acknowledge the mispricing of MLSOA is due to the potential leverage offered, but it doesn't explain why MLSO is trading at discount).
As you can see from the 'total position value' table, the cells in green are the 'best result', in yellow second best, in red is the third best.
The price as which MLSOA overtakes MLSO as the better leverage play is at 2.4 / 2.5c on heads.
View attachment 915542
A few other points to clarify;
1. You do NOT need to exercise (Pay to convert) an option in order to trade it. They can be purchased and sold in exactly the same way as the heads (i.e. 'MLS' shares).
2. If you DO choose to exercise your purchased options, you must pay the company the exercise price per option and they will issue you shares. For example buy 100 MLSO at 1c = $1, pay the company 30c (0.3c per share) and they will issue you with 100 MLS shares, which have now increased from 1c purchase price to 1.3c value on market (assume the SP distance was strike price distance at the time)
In short summary, MLSO is the best purchase at these prices, and offers greatest returns on MLS up until 2.4/2.5c on heads. MLSOA offers the best value after 2.4/2.5c. In practice, if you do not expect to hold MLS until 2.4+ it is better to buy MLSO, and if you are a LT holder and will hold past 2.4c, then MLSOA is the better buy.
Risks;
1. Options are not without risk, with greater leverage on profit, comes also the risk of greater losses if the price falls.
2. There is slightly less liquidity in the MLS options, however still better than most stocks IMO, so getting in or out at your desired price will not be as easy as if you were trading heads, and some more patience might be required on exit.
This is ALL IMO, and is not a buy or sell recommendation on MLS.
Best of luck to all holders regardless of what variation of MLS you hold, I am sure we will all do well!
Zest
