You are best to contact your broker and find out the correct process and timeframes required for exercising options.
I think you will find that it is a partly manual process and therefore you should do it sufficiently before the expiry date. Just don't leave it to the day of expiry! The process may involve calling your broker, probably filling out a form and ensuring you have the funds to cover the cost of exercising in your account. The process and timeframes may vary from broker to broker.
The following is my understanding but seek advice from your own accountant - Be aware of CGT implications with options. Options are an asset just like shares but they are not the same asset. I understand that exercising them results in the generation of a new asset. That means the CGT clock is se to zero for the shares you are issued as a consequence of exercising the options.
There are a number of strategies you could consider employing with options:
- Pay the money to exercise the options after the exercise price has been achieved ( you will own the equivalent number of heads after you exercise them )
- After a period of rerating just sell all your options for a profit
- After a period of rerating sell a portion of your options to cover the cost of exercising the remainder ( but need to take into account CGT for the options you sell )
- After a period of rerating sell all of your options ( put some money aside for CGT on sale of the options ) and then buy the heads with the money left over.
General theory of 1, 3 and 4 is leveraging your way into a larger holding of heads. CGT must be carefully considered. It also means that for some of these scenarios you don't need the options "in the money" to benefit from the leverage.
Of course you also have the somewhat negative scenarios:
- Poor company/sector performance or a major mark meltdown, your options become worthless
- The company goes into administration and your options become worthless
- A takeover occurs and your options become worthless
Also be aware that DF has been issued with zero-exercise price options ( 20M of them ). They are designed to be an incentive to get us into commercial production but in the case of a takeover/control event to the satisfaction of the board, DF will be able to exercise these unlisted options at nil cost ( for 20M shares in the company ).
Treat a, b and c below as fairly strong incentives for DF to get this company successfully producing from Montepuez Stage 1 & 2 and Balama Stage 1 ( i.e. 150ktpa ).
Reasonable to think our share price will be 50c+ by the time Balama is producing. That's a $10M incentive for DF.
From:
https://www.asx.com.au/asxpdf/20180524/pdf/43v8ns8zksc5m0.pdfView attachment 1451335DF also has 20M additional unlisted options exercisable in the range 10c to 25c. So further incentive to get this company performing.
View attachment 1451353
