52 Ways of Making Money in Stock Market - Part 26/52 - Offer Premium to ESOS

Offer Premium to ESOSWhat is ESOS? ESOS is Employee Share Option Scheme.

Example as an employee, he or she is entitled to buy certain quantity of the company shares at a fixed price.

Assuming your cousin work in ABC Bhd. His ESOS entitled him to buy up to 20,000 shares at $3.00. The expiry date is 5 year.
The market price of ABC is $3.40.
He wants to subscribe his ESOS, total cost is $60,000, market value is $68,000.
He will make $8,000.

But you ask him to WAIT WAIT WAIT ! ! !.
You offer him $8,800 informally.
He say yes because he got extra $800 and he no need to come out with $60,000 to subscribe, and you pay him $8,800.

After 5 years what happen?
If the price drop 75% from $3.40 to $0.85. You do nothing and the ESOS lapsed and you lose $8,800.
If the price increase 75% from $3.40 to $5.95.
You pay him and ask him to exercise his ESOS (cost $60,000) and sell at $5.95 (sales $119,000), gain $59,000.
After minus out your initial cost of $8,800, net gain is $50,200.

Why good?
*Your investment is $8,800, and you make $50,200, that is 470%, although the ABC shares just up 75%.
*Your maximum loss is just $8,800. But your maximum gain is unlimited. The above example is just up 75%, 5 years many things can happen, if the price up 120%, then you will make more than 1,000%.
*Conclusion is, minimum loss, maximum gain.


RISKS, LIMITATIONS OR DIFFICULTIES:
You need to find cousins or friends or family members with ESOS.
They also need to be trusted? So that they will not run away or exercise the ESOS without your knowledge.
You also need to convince them to take up your offer.
Not sure whether this is legal or illegal?
What if your cousin meets with an accident and pass away? The ESOS is gone.


OPINION:
Worry about cousin pass away or what? Remember your maximum loss is $8,800?
If you have opportunity, calculate it, evaluate the company whether can grow or not, and can consider it.
Don’t ask me whether this is legal or not, I don’t know. This is an informal arrangement between you and your friends/ cousin/ family members. Please check it yourself whether legal or not.

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