I feel like such an addict, but I couldn't resist getting more April $7.50 Calls today @ 20 cents. I just can't keep away on this weakness in the face of massive possible news.
I bought a bunch of them after the CC based in the "Late March/Early April" guidance. Still a very small portion of my overall AVI position, but would add nicely to profits if we do receive anything before Friday. Wasn't a bad bet then (and it is, certainly, a bet that augments the potential of my investment, and not in any way a serious investment), but I just can't get over it still looking good to me now, even with only four days left.
I guess I'm the only one in the market that thinks we could still rally $1 by friday? Options expiry has been a bone of contention between we "retailers" and the manipulators in recent expiries. Even with the massive OI in April Options, I'm sure the same will be the case this go around. Yet, here I am, having just bought more April Calls.
I can assure you I won't be complaining if we're down here on Friday, and I know we easily could be without news. I'm well invested in this stock outside of these gambles and wouldn't suggest to anyone that they follow me down this road, as I am probably throwing money away. It's a stupid thing to do, yet, I said that to myself before and after I bought them today.
I guess my point is that, I may need the AVI 12 step program soon.
If you don't mind...you could possibly take the "thorn" from many paws here.
Would you be so kind to give us the arithmetic involved in your recent purchase of options? You said it cost you $.20 for the option. Was that for option on one stock or on one thousand shares?
If you exercise your $7.50 option Friday(?) and the stock closes Friday(?) at $8.50, what have you gained? Does this include the $.20?
As long as you understand I'm not suggesting anyone actually do this. It's a stupid trade and anyone with any sort of money managment credibility would tell you not to do this. I will, solely for the sake of education, explain how the trade works.
If you buy an April $7.50 call for 20 cents, it costs you $20 per options contract. Each options contract is for 100 shares. If the price of the shares goes over $7.50, the options gain "intrinsic" value. If the price never gets there by Friday, you loose the $20 (plus brokerage). If, to use your example, the share price goes to $8.50 before options expiry, the options will be worth $1.00 in intrinsic value, the difference between buying at $7.50 and selling at $8.50. If the price reaches $7.70, your intrinsic value is equal to the $.20 you paid. Since you are buying, with your $20, the right to buy 100 shares at $7.50, the mathmatics multiply the cents received by 100, per $20 option you bought.
The other component to the price of an option is "extrinsic" value, referred to as time value in denarii's post earlier. You have to pay 20 cents for these options with the share price at 6.70 - and you'd have to pay even more if the share price was at 7.49, even though they would expire worthless at 7.49. The theory being, it has time to move around between now and expiry, so a premium is called for. The amount of time value in an options price is partly a function of how volitile the share price is (along with other market based supply demand adjustments that skew the "implied volatility" of an actual options price). This time value can be substantial, and in this case, decreases down to zero between now and Friday.
I have no intention of actually buying shares at 7.50 and don't expect to exercise these option into shares, so I will have to sell them out as options for the best market price I can get between now and friday. So the timing on the sale would have to be very good. This is also a consideration, because liquidity towards expiry will be an issue, and I may need to cross the bid ask spread (market order) to get out.
I hope I answered you question, and please, don't go and do this unless you have an unhealthy disdain for money. Although I will be laughing very loudly to myself if this works (which it won't), I completely expect these options to expire worthless. I have longer dated, more sensible options positions as well as actual stock share positions in AVII as a long term investment. This is just a lark done out of boredom.
copphiggins - It is strangely comforting to see someone nuttier than myself. You will want to sell them before expiry, and I suspect, if anything actually happens, you'll know when it's time to do so.
us2china2 - Step one is covered and then some. It's so hard to pick a level for a company with such groundbreaking possabilities. Needless to say, I hope to get out somewhere between your $200 target and Dr Ira's $90,000. Step three is practically impossible for me, this company and it's technology is far too exciting.
vskomarovsky - I have to say it's nice to be independant from your guts. ;) It's also nice to have confirmation that someone else doesn't see this as horrible risk reward/odds play (even though it really is). It's not an investment, and I'm sure you also have investments in AVI. I'm not sure what makes this not a gamble, but I'm with you. Everything you are told about trading says not to do this, logic tells you it's a stupid thing to do, and I still couldn't talk myself out of it.
good luck to you. decay is a tough thing for option buyers. I purchased more shares today @ 6.67 and let those ride.
OT OT OT: on a gambling note : watch this vrdm : damn had it 6 cents but hype might take it much higher than .28-- super high risk. no current position and very fluid id any. ethanol etc.
I've been doing the same BTF. Never bought options before, and I'm not sure what to do with them on Friday!!! Do I just sell them? at or before 4 pm Friday - if they're in the money? (Now you know there someone nuttier than you!