Effect of company issued options on share price

2018-10-19 05:01:46

A company has 100,000 shares and 100,000 unexercised call options (company issued). Share price and strike price both at $1.

I assume the fact that these options exist will slow any price increases on the underlying shares due to potential dilution?

If this is the case, can this be factored into any option pricing models like black-scholes?

The answer to your question as asked is no. Call options, even those issued by the company, cannot create new shares unless they are employee stock options.

Company-issued warrants, on the other hand, can create new shares.

A company has 100,000 shares and 100,000 unexercised call options (company issued). Share price and strike price both at $1.

What country is this related to? I ask because, in the US, most people I know associate a "call" option with the instrument that is equivalent to 100 shares. So 100,000 calls would be 10,000,000 shares, which exceeds the number of shares you're saying the company has.

  • The answer to your question as asked is no. Call options, even those issued by the company, cannot create new shares unless they are employee stock options.

    Company-issued warrants, on the other hand, can create new shares.

    2018-10-19 05:12:17
  • A company has 100,000 shares and 100,000 unexercised call options (company issued). Share price and strike price both at $1.

    What country is this related to? I ask because, in the US, most people I know associate a "call" option with the instrument that is equivalent to 100 shares. So 100,000 calls would be 10,000,000 shares, which exceeds the number of shares you're saying the company has.

    I don't know if that means you pulled the numbers out of thin air, or whether it means you're thinking of a different type of option? Perhaps you meant incentive stock options meant to be given to employees? Each one of those is equivalent to a single share. They just aren't called "call options".

    In the rest of my answer, I'm going to assume you meant stock options.

    I assume the fact that these options exist will slow any price increases on the underlying shares due to potential dilution?

    I don't think the company can just create stock options without creating the underlying

    2018-10-19 05:29:53