Re: CCC and CCCO
Hi,
I am new in stock market. Some people are talking about CCC [ CONTINENTAL COAL LTD FPO ] and I also found there is something called CCCO [CONTINENTAL COAL LTD OPT FEB13]. I found most of the stock contains 3 letters, but why CCCO got 4?
From Commsec it is possible to look the price of this two CCC and CCCO?
I am missing something?
Waiting for your replies.
The O denotes a stock option.
Such an option gives the holder the right, but not an obligation, to buy a number of shares (usually one share per option) at a pre-determined price by a pre-determined date.
For CCCO, the expiry date is the 13th Feb 2013; the strike price (which is the price you have to pay to convert one option into one share) for CCCO is 5c. That means, the option has an "intrinsic" value of 5c below the current price of the motherstock CCC.
However, people may consider it very likely that CCC will, at some time within the next 2 years, be traded much higher than 10c; therefore, they pay a "premium" for the options.
Consider the gains you would make if CCC were to triple from current 9c to 27c - just as an example, not a "prediction". 100,000 shares will grow from $9,000 to $27,000, gaining $18,000. But at current prices, $9,000 will buy you 160,000 options at 5.6c. (keep the change)
Convert them by paying 5c per option, and you will hold 160,000 shares that cost you 10.6c a share, which you will then be able to sell at 27c each. That's a profit of 16.4c per share or $26,240 in total. Both profits on an initial outlay of $9,000 because you only have to pay the additional 5c when you convert.
PS: Stock options must not be confused with
Exchange-Traded Options or ETOs. While the principles are similar, ETOs are contracts between an option writer and buyer and exercising won't increase the number of shares on issue; stock options are issued by the company, and the exercise will increase the shares on issue as well as the company's cash. (When you convert 160,000 CCCO, you pay those $8,000 directly into Continental Coal's account.)