What is a company option and how do I exercise them?

by

Superhero Team

July 1st 2021 3 minute read

An option is a contract that gives you the right but not the obligation to buy or sell a security before the expiration date, at a predetermined price (exercise price).

Company options are call options issued to shareholders by the company. Option holders have the right but not the obligation to take up (exercise) the options and purchase additional shares in the company. Some company options may be listed on the ASX meaning investors can buy additional options or sell their existing options on the market. However, an option that is not listed on a public stock exchange cannot be traded.

Another feature of company options is that the terms and conditions of the options (i.e. exercise price and expiry date) are determined solely by the issuing company and disclosed in the prospectus documentation. Hence, company options are non-standardised contracts and investors, as with any investment, investors should always read the full prospectus document to ensure all terms are understood.

Exercising your options

When exercising your company options, you agree to purchase the underlying security at the predetermined exercise price, regardless of the market price of the underlying security at the time you exercise your option.

If you wish to exercise your options, you must submit a request up to 3 business days before the option expiry date.

If you purchased options on-market and wish to exercise them, the options must first settle in your account (ASX T+2 settlement rule). This means you must purchase the options at least 5 business days before the option expiry date to be eligible to exercise them in your Superhero account.

Your application will only proceed if you have sufficient funds in your Superhero Wallet at the time you submit an exercise request.

If you have any further queries or wish to exercise your options through Superhero, please contact us on live chat or email us at hello@superhero.com.au.