Over the past year I've built up a large parcel (124,000) of Options to purchase ING Private Equity (IPE) shares at $1.00 each. The options only cost a couple of cents each on average, so my total investment is around $2,500. The original plan was to hopefully sell them at a profit before the expiry date at the end of October - just a few percent rise in the IPE stock price above $1.00 would cause the IPEO price to double from 2c to 4c...
However, as the chart below shows, IPE has stubbornly refused to move more than a few cents above the $1.00 float price, despite the Australian stock market hitting all time highs in the past couple of days. I had expected the IPE price to climb back to over $1.10 (which it reached in July), but it has refused to rise above $1.03 despite the diluted NTA of the shares being an estiimate $1.20 or more. I had a feeling that once the options have expired the IPE shares may increase to "fair value" of around $1.20 - but to benefit from this I would have to excercise the options at $1.00 each. Betting $124,000 on such a "hunch" is a bit risky, although unless there is a massive market plunge the IPE price shouldn't drop below their recent low of $0.95. This would mean a loss of around $5,000. Perhaps it is worth taking the plunge and funding the options excercise from my available margin loan credit.
The alternative would be to sell my options at the current price of 1.3c - which would mean crystalising a much smaller loss of around $1,000 on my IPEO investment. Decisions, decisions - at least I have until the end of next month to decide one way or the other.
Copyright Enough Wealth 2007