Owning the MRFOA option gives you the right to purchase the head share (MRF) at the exercise price (20c), any time up to the exercise date of October 17 2016 - so about 16 months to go.
If the head share is below 20c at that date, your option is worth nothing (cheaper to buy the head share at the market price).
If the price of MRF shares is greater than 20c at 17th October 2016, then you have made a significant gain. Options can give you leverage on the share price:
For example, if the MRF share is at 40 cents by that date, the gain on the head share from today would be 7x, (40 divided by 5.7) but the gain on the option would be 19x (20 - 1 divided by 1c) the 1c being the current option price.
There are not a huge number of options compared to many other companies that have options. so it may be a bit tricky to get them at this price, especially if the MRF's increase in price.
With quite a long period til expiry date, if you are a true believer, and think there is a high probability that 20c for the head share will be reached by then, then the options are a great deal. BUT, they are risky - if the head share doesn't reach 20c by 17th October 2016, you have lost your dough.
I have had both success and washouts.
How much of a gambler are you?
MRF Price at posting:
5.7¢ Sentiment: Buy Disclosure: Held
