Company options are options issued by a company over unissued shares. Provided the share price at the time of expiry is above the exercise price, the option holders will exercise their option by paying the exercise price and be issued with a new share in the company, which will then rank equally with other ordinary shares.
Company options are a method by which companies can raise additional capital at some future point in time the expiry date , but this is not guaranteed as it is subject to the share price being above the option exercise price at that time. Company options are also used as employee incentives and may be tied to performance, but these are not listed on the ASX. Exchange Traded Options ETO's are a derivative product issued over existing shares, with each option being for a parcel of 1, shares in the underlying companies shares.
They are generally only issued over large cap stocks with good liquidity. Options can be used by investors in a number of ways, including reducing the risk on a portfolio, increasing leverage, for income, or just for trading. ETO's can provide benefits in both a rising or falling market. In any event you should consult your broker, and they should provide you with a detailed explanation of the ETO market before you trade, Both Company Options and Exchange Traded Options provide investors with leverage to the upside of a companies share price due to their lower price, with Company Options potentially have a greater risk in the case of the share price falling, and do not receive entitlements for dividends.
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