Share Option Scheme?

Question

I have an invitation to join a share option scheme... but don't understand it!

I am told I can aquire x*x shares of 2 1/2 pence each - and that the Exercise Price Per Share is c. 220 pence.

What does this mean? Am I purchasing at 2.5p or 220p?

Answer 1

you're purchasing a contract for x*x shares for 2.5p per share at the contract value.

Why? because the stock itself must be above 220p for your contract to be worth more than scrap paper.

Find out what the stock is worth and when the contract expires.

if the stock is at 110p and the contract expires 2 months from now, chances are it will expire worthless.

Answer 2

The option contract gives you the right, but not the obligation, to buy shares..

For 2 1/2 pence you buy the right to buy the stock 220 pence.

If you exercise that right and actually buy the shares you will pay another 220 pence, making your total cost per share 222 1/2 pence.