I want to know if $1000-$3000 investment in a bbt call has any merit and if so, where on the web could I go to look into actually making the purchase. I think the stock will hit $35.00 in 2011. Is there money to be made on a call at that price level, and what are the costs associated? Thanks
Most of the online brokers let you buy options, however not all will let you write an option (or sell an option). Sign up for Etrade or TD Ameritrade, and then fill out an option trading form. The cost of trading options is higher than stocks, usually around $10/trade and around $0.75/option.
So if you took $3,000 and bought Jan 11 BBT call options with a $35 strike price, it would cost $10 plus $0.75 times each option purchased. In this case each option is selling for $0.75 (or $75.00 b/c each option gives the owner the right to purchase 100 shares at that price). Thus, you could buy 40 call options for $3,000, and would pay about $40 for the transaction.
There is certainly money to be made in this trade, however it is a long shot. BBT would need to be trading above $35.75 by Jan 11, which would most likely take a buyout. Say the stock was trading at $40 by Jan 11, then your options would be worth $500 X 40 or $20,000.
Better strategy here if you are that bullish would be to sell put options and use that money to buy the call options. There are all sorts of option strategies, most are less risky than simply buying call options.
Correction... I should have said Jan 12 options in the above post. Forgot what year it was.
Also, the Jan 12 puts are selling at a bit of a premium to the calls. You could sell 40 of the Jan 12 $25 put for $2.50 and buy 40 of the Jan 12 $35 calls for $0.75. That would let you put your trade on while collecting $7,000, instead of laying down $3,000 out of pocket.