Not advice. The below is general information only. It is not a recommendation to do one thing or another. You need to take into account your own tolerance for risk.
What am I waitng for? - The company to make progress on their Project Development Objectives. Once they have defined resources and shown they are economic (with testwork, scoping/feasibility studies, MoUs/Offtakes associated with selling future production ), the share price will ultimately rerate when future earnings and growth potential is recognised by the market. That tends to occur more easily and quickly when company, sector and market sentiment is strong (e.g. in a bull market).
In essence I'm chasing upside and growth potential. This is driven by prospect of future cashflows or progressive earnings growth into the company. The market and share prices start to recognise earnings and cashflow potential as the projects are progressed through the key development steps ( listed above ).
My background is investment in income/dividend stocks ( which I still invest heavily in ). So my perspective is to look at speculative microcap companies from a future income perspective. That's why I spend so much time looking at peers. It helps to assess potential.
For me options are a risk-reward purchase. Options have a strong potential to deliver significantly greater upside as the heads rerate ( options rerate at a much faster rate than the heads ). That's why I invest in the options - for the leverage. See the chart below, which is indicative of the difference in the rate at which the heads and options rerate. You grow your investment faster. "Bags" is just a simplistic metric for profit on your initial investment ( 1 bag = 100% profit, 0.67 bags = 67% profit ).
In the example above, assume you invest $1000 in heads and $1000 in options at the same point in time. Assuming the heads rerate after say a 6 or 12 month period of the company achieving goals, the value of your holding of options will be worth more. $1000 -> $1,895 for options versus $1,000 to $1,500 for heads in the example above. I must qualify again that the above is just a model, it is an approximation of the rate at which the heads and options may respectively rerate ( I create models like this to assess potential leverage - some options have more leverage than others ). Company progress, sentiment, market forces and buying demand for shares or options will ultimately determine their relative movement in value of the shares and options.
I also invest in options because I can secure a much larger number of units than if I bought heads. With options you can often secure very large positions very cheaply. In once stock I was buying options for 25% or 30% of the value of the heads. That stock has a 5-year exercise window so the potential leverage is huge given their earnings growth plans. Options have a strong potential to make you a very significant profit in a situation where the stock price goes many multiples above the options price.
Once options are in the money I can then determine a future point at which I will exercise them ( pay the cash to convert the options to shares ). Alternatively I can sell a portion of my options to fund the exercising of the remainder. Another approach is to sell your holding of options and buy heads instead.
There are also capital gains tax intricacies to be aware of in all this. Both for the CGT discount and the CGT clock. I won't go into the specifics. You should really talk to your accountant for professional tax advice.
Options can be a big risk in a takeover situation ( they could become worthless ). Options also often have very low liquidity. When they crash, they can crash hard ... but conversely when they rerate they can rerate very fast when there is a significant rerate of the heads.
NVA Price at posting:
2.4¢ Sentiment: Buy Disclosure: Held
(20min delay)
