Please explain the Magellan Options situation, i.e. MFGO

Hi Peter,

We provide general as opposed to personal advice at Market Matters. As a reminder, an option gives the holder the right, but not the obligation, to buy or sell the underlying security for a predefined exercise price (or strike price) before a set date (expiry).

In the case of Magellan options, it is important to recognize there are two different securities (options) out there with different codes. The MGFO and MFGO. The MGFO which MFG are buying back at 10c (and is currently trading at 10c), gives the holder the right to buy into the Magellan Global Fund at a discount to the net asset value, with further details here. These are being bought on market by MFG and holders can sell into that bid to get 10c of value.

The MFGO on the other hand is also listed and gives the holder the right to buy Magellan (MFG) shares for $35 on or before 16 Apr 2027. This option is listed and closed on Friday at 16c. The best way to look at these options are as a leveraged ‘punt’ on the MFG share price. If MFG is trading at $34 on expiry, the options are worth nothing. If MFG is trading at $36 on expiry, the options are worth $1 with the buyer/ holder at 16c, making ~6x their money.

Hope that helps clear up any confusion.

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Magellan Financial Group (MFG)

LAST UPDATED 15/12/2023 22:41

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Magellan Financial Group (MFG)

LAST UPDATED 15/12/2023 22:41