Someone comes in nearly each month a week or so before options expiration and buys 100 call contracts at the next strike price. (Gora, is this you?)
I don't really see the value. $.60 per contract implies you need a 7+% return (from $23.86) in order to break even...and in just over a week's time. There is no expected information forthcoming and the stock has been treading water in/around this area for some time now.
I'd be much more a seller of those calls - which I have been.
Just my two cents for today.
This stock is a buy and hold. I think anyone that trys to time it will get burned. Thus people writting options will do well, provided they are OK with the shares eventually getting called (could happen soon or later, no idea, but it will happen).
My time horizon is next summer. Meaning, I think they'll keep getting RC plants on line and by next summmer will be in the $30s or $40s. Will ACI sales have an impact? Assume so, but thus far it just seems like ACI is just talk which I count as a maybe/some day upside.
I'm all for the challenge...though I hope you understand I would love you to win. If you win, that means we ALL win. Perhaps after a few more earnings quarters and updates (by April), we'll see some share price appreciation. But for now, it's still a wait-and-see game. We're seeing large block sells and with low volume, it's really driving us down. I've written quite a number of calls over the last few weeks...all over the spectrum...today I even wrote some Nov $22.50s. If the selling pressure doesn't subside, we could easily drop back into the $20s.
Everyone's clamoring for an update, but management has never really been a 'shareholder- minded' group. I've voiced my wish for insider buying, but years of nothing but sells have taught me not to no longer expect that.
Anyway, hoping we see a bottom soon.
The options do distort the share price. In general, most of the options are beign written by the maket makers. Assume a few are written by indidual/small traders, but most are by the MMs who trade as follows:
What the MMs do is write them "naked" while the options are out of the money and cover by buying shares as they move into the money.
To use the Oct 25s as an example, there are options on 115,000 shares at 25 which are "out of the money. If the share price rises above $25, the MMs will start buying shares to elimate/hedge their risk the shares run up. Clearly they have an incentive to keep the shares below $25, but some good news may be more than the MMs can handle. If we push past $25, it will trigger buying of shares by the MMs to hedge their risk on the Oct 25s. Once the MM have bought shares, they don't really care where the shares go.
What kills share price is when holders of options sell "in the money" options. Given the MMs own shares to hedge the risk of writting in the money options, the MMs sell the shares when buyers cash out of their options which pushes the share price down (generally applies to "in the money" options only).
Can't say we'll break $25 before options expiration, but if we do, the 115K shares under the Oct 25s provide a lot of fuel to run higher and the MMs buy share to cover the naked option contracts they wrote. A little news right now would be really apprecated and might trigger a nice short squeeze.
I wondered if that was Gora as well.Btw
Hale check out the Bollingers,and amount of time we have been in this ever tightening range which now is around 23 x 24.50...i think a decent move is coming,but given short interest and high STOCHs,but would think that we are likely to be back down to the lower range 20-21ish soon. I agree with your call selling.
That Packers game was a complete mess. Can't believe the call at the end of the game.
I'm happy to share my trade. I would reiterate that these trades, like any investment, are part of a strategy that fits my plan and may not be the best or most logical trade for someone else. (gosh, that sounded awfully like a disclosure).
The reason I've been selling calls is simple. I am grossly overweight ADES in my portfolio and I need to start divesting a bit. Rather than simply outright sell, I'm staggering limit orders and simply selling calls at those prices. If we hit/exceed those strikes, then I get called away and I reduce my position. If not, I re-write and we start again...and I get paid to wait.
Gora's strategy of a net-zero cost buy call/sell put made sense for speculation, but not for me as I want to A) make money while I wait, and B)not be at risk to incur any additional loses (&/or purchase additional shares) should the share price drop significantly.
Most recently, I sold both Sept. $22.50 and $25 (calls). I bought back some of the $22.50s and rolled them over to November $25. (also, don't want to incur too much in cap gains for the year....though if Obama's plan goes through, I may reconsider that before year's end). I'm also selling Jan $30s....which is a good exit point for me on some of my shares. (That's only paying a buck, but it's still a 12% annualized return). Too bad we don't have $27.50s as an option. I'd probably sell some of those too.
I"m nervous about the headwinds here...both for the economy, the market and the industry. Obama, if he had his way, would eliminate coal. Republicans are opportunistic and will jump to whatever/wherever they can find a way to make money. Paying more for cleaner coal doesn't seem to be priority on anybody's list right now. That's another reason to simply write the calls and wait and see.
Good luck with whatever you do.
PS - this new message board format stinks!