Difference between Shares & Share Options?

Discussion in 'General Chat' started by Goooner, Sep 14, 2007.

  1. Goooner

    Goooner
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    Was watching Mission Impossible 2 the other day and it reminded me of a question I've wondered about since 1st seeing it. Towards the end the bad guy wanted so many millions of shares in the other guys company as the shares, if everything went as planned, were about to go through the roof. So he told the other guy he wanted 51% or something of the sahres in his company, so he'd also have the controlling interest in the guys company, then he changed his mind and said he didn't want shares, he wanted share options, so what's the difference, in laymans terms?
     
  2. dBrowne

    dBrowne
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    Share or stock options: A privilege, sold by one party to another, that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed-upon price within a certain period or on a specific date.

    Why the bad guy would prefer to have the right to buy the shares at a pre-agreed price sometime in the future rather than just being handed 51% of the shares outright for nothing as in your scenario, I can't help you with.
     
  3. booyaka

    booyaka
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    Basically they are the right to buy shares in a company at some point in the future at a favourable price - if they hit specific performance targets or alike.
     
  4. dc007

    dc007
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    Two reasons ;

    1/ He would be releasing less capital to buy the options. (He only pays a small amount for the option, then the balance if he exercises the right to buy).

    2/ Because he was releasing less capital, if it all goes pear-shaped he'd only lose his option money, and no more...

    So he was minimising his risk.

    Edit - Oh, I see he was being given the stock or the options. Well, I guess the advantage to just owning the options could be either because then he wouldn't appear on the shareholder register as a holder, or also for tax implications - though I can't see the little rascal declaring much in the way of capital gains... !
     
  5. dBrowne

    dBrowne
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    I was under the mistaken impression that he was considering extorting the 51% for nothing, hence my confusion. Thanks for clarifying.
     
  6. Goooner

    Goooner
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    Thanks guys, it's pretty much as I thought it was then, but I assumed I must be missing something as he was getting the shares/options for nothing anyway, I could see no advantage in having options rather than shares, I'll just put it down to bad writing :)
     
  7. johntheexpat

    johntheexpat
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    Would this be a good time to buy some Northern Rock call options? Say with a view to buying some at 20% above todays closing price in 6 months time. Anyone got any ideas how to find out how much they would cost?
     
  8. imightbewrong

    imightbewrong
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    Probably relatively expensive as the volatility of the stock is currently very high - even though it is going down.
     
  9. imightbewrong

    imightbewrong
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    Although probably cheaper on Monday when the stock price drops even lower on market open after it adjusts for the exodus of savings cash this weekend (IMHO).
     

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