Forum Archive Index - July 2001

["Earle Tute" <e_tute@clear.net.nz>]

Hi Ross,

            Re your questions about options.

1. Some companies have exchange traded options which are quoted and traded in exactly the same way as shares.

2.These options allow you to buy one of the companies shares at some stated time in the future at a predetermined price.

3. Options normally trade at a fraction of the ordinary share price, until (if) the ordinary share price reaches the option price, at which point the option is said to be "in the money", and price increases more or less cent for cent with the "head" (ordinary) share. 

4. If the option approaches the final conversion date "out of the money" its value drops until it is worthless on the conversion date.

5. The result of the leverage given by the above events can make you very rich or very poor ..........very quickly!

 

If anyone would like to add more info for Ross please do so,

                                                                    Have Fun,

                                                                                  Earle.