Hi Futurist88. Welcome to the fold - Hot Copper, Share Market...

Hi Futurist88. Welcome to the fold - Hot Copper, Share Market trading in general and investing in Droneshield in particular.

Options are a right, but not an obligation, to buy something at a set price at or by a set date in the future. In this case the option is called DROO, the something able to be bought is DRO shares, the price is 22c and the date they can be bought by, at any time, is 14/6/2018. The fact that DROO was trading at 22c when you posted was a pure coincidence.

At the time you posted DRO were selling for 48.5c. DROO should have been no less than 26.5c, being 48.5c less 22c conversion cost. It is not usual to see such a discount to true value as the sellers of DROO were effectively giving away 4.5c per option. The smart buyers would have bought the options then and either waited for the options to catch up to fair value (i.e. DRO price less 22c) or sent off a cheque or bank transfer to the Company and converted their DROO into DRO. They could then sell or keep the DRO shares which they had thus bought at such a big discount. Incidentally I sold my shares today at 47c average and replaced them with options at 20c, giving me an instant 5c profit per share, and will be doing just this.

I see three possible reasons why DROO are selling at these nearly unprecedented discounts...
1/ The Droneshield IPO appealed to a lot of first time share buyers like yourself, Futurist, many of whom do not understand what an option is.
2/These purchasers are able to recoup a big percentage (today more than 100%) of their original outlay by selling the options because Droneshield made the unusual move of issuing one option for each share purchased, whereas the normal ration is one for two or one for three or less. Thus they flooded the market with options.
3/ Purchasers of options on market will in many cases be sitting on profits of 300 or 400 or 500% or more and are finding it irresistible to take profits, especially as purchasers of fully paid DRO shares on market are only looking at profits of no more than 100%.

Anyway as time goes by this value gap will inevitably close (unfortunately), especially as more DROO are exercised.

Hope this helps.