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Essential Option Strategies by J. Kinahan

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Chapter 5Options Basics

You wrote your first novel, and the book is an amazing success. Titled The Final Last Option, this 250-page thriller is selling more copies than you ever imagined. Readers can't get enough, and there is even talk of making the story into a feature film.

A producer approaches you about the book rights for a movie deal. However, he isn't yet sure if he can get approval for a budget from the production company. Nevertheless, the producer wants to retain the right to the story for a specified period of time while he tries to obtain the necessary financial backing.

You and the producer agree to a fixed, one-time payment of $10,000 for the right to buy the story from you for $1 million for a movie scenario. You agree that at the end of a six-month term, the agreement ends, and you are free to sell to a different movie production company if the producer has not paid you $1 million within that time frame. You keep the one-time payment of $10,000 regardless of whether the producer moves forward with the movie.

Five months later, you get a different offer of $1.5 million from another movie producer. You are hoping the first producer doesn't ask for the rights, because his initial $1 million offer is $500,000 less than the latest one. Unfortunately, he says he wants to move forward with the film deal. You are now obligated to sell him the rights based on the agreed upon terms. He is buying the story from you for $1 million, and you also keep the initial payment ...

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