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Venaxis, Inc. Message Board

  • spontaneddious spontaneddious Apr 26, 2010 4:28 PM Flag

    I'm a little confused. Why ...

    ... Why would anyone buy the $7.50 Call Options for September now? Anybody? Somebody? Why? What would the price have to near term or long term to double/triple your money? I looked at the volume and it was over 250 for these call options. What gives here? Only $1 to buy them now & the stock is at almost $5? Something doesn't seem right.

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    • I too don't understand options, but here are some thoughts which may help.

      quote:
      If the trial data is strong postive, what do you think
      the stock will trade up to? what is the fair value for APPY if FDA
      is going to approve Appyscore in SEP? Very simple, buy stock here,
      you make 150% in two weeks, but the SEP 7.5 options makes 400%,
      if trial fails, stock holder lose may be 50% to 60%, option holder lose 100%.


      I guess an example may help:

      If have $1000 - buy stock, on success goes to $2500 (make $1500 i.e. 150%), on failure goes to $400 i.e. 40% (say).

      So with stock have upside to $2500 ($1500 gain), or down to $400 (loss of $600) on initial capital of $1000.


      With options, starting with $1000 - if put $600 in options, and $400 keep as cash - on success options value goes to $3000 ($600 x 5 i.e. make $2400 i.e. 400%), on failure lose all i.e. $600 lose and $400 cash in hand.

      So with options, have upside to $3000 ($2000 gain), or down to $400 (loss of $600) on initial capital of $1000.


      Not meant to be exact figures, but just to illustrate that there COULD be a choice between stocks and options just on this basis.


      However I am not sure if people would be buying options alone - as my guess is if there are TOO many options sold, the MMs, or options sellers have an incentive to manipulate the stock price around options expiration (i.e. it is TOO easy to manipulate stock on expiration compared to the huge amount of money bet on outcome of options - just SEEMS that it would naturally lead to options sellers making sure they pay out as little as possible ?).


      Another possibility maybe that if you are expecting stock to go up to $20 or something huge, then it maybe CHEAPER to buy the $7.50 options (if they are half-priced can buy twice the number of options for same price).

      So an example maybe that if $5 call options cost $2 and $7.50 options cost $1.

      And if the stock eventually goes to $20 (say).

      Then for $1000 bet on options - with $5 call options you can buy 500 options, and you make 500 x ($20 - $5) = 500 x 15 = $7,500.

      While if you bought $7.50 call options you can buy 1000 options - and you make 1000 x ($20 - $7.50) = 1000 x 12.5 = $12,500.

      So for this scenario you could make MORE with buying the $7.50 call options than with the $5 call options.

      This is a guess - maybe someone can correct if this is wrong.

      • 1 Reply to vicl2010v
      • quote:
        The Sept 7.50 calls would increase in time value even if the stock stays below 7.50. Whatever your paying for the option now is time value. As you get closer to Sept without any extreme price movement upward your time value will decrease. So if good news propels the stock to 6 or 7 dollars in May or June you would definately see your options increase in value even though you are still below strike price.

        I don't understand this fully - but like stocks, options also trade and can be resold, and so their market price varies over time.

        It is possible that one COULD buy $7.50 call options with the express purpose of making money on the rise in it's value purely from the fact that stock price may rise in next few days. Then they could perhaps resell the call option at a slightly higher price and make money that way (don't know if this is preferable to just buying the stock if THIS is the thinking ?).


        So call options may have some "dynamic" value purely from how their price varies with stock price movement.



        One possibility that is perhaps more mainstream (?) maybe that with the rise in price, shorters start emerging from woodwork seeking to sell short now - anticipating a fall in stock price "eventually" (perhaps in the lull after results are announced and are waiting for FDA approval some months later - so they know MMs will eventually try to shake stop losses that longs have set while they are waiting in that period).

        But to protect themselves they buy call options to protect against the most extreme swings in price.

        This would be the counterpart of the strateg to buy put options (that some posters have suggested today to longs). This strategy would seek to protect the long from "the event" i.e. while longs maybe sure of success, in order to reduce risk of downside they may buy put options.

        But as stated above I am not so sure how much one winds up protected by buying options.

        As some have said on these and other boards, it maybe the options sellers who have the advantage - and as I suggest above, it maybe more true when there is huge options volume - in THAT case it may turn out that it is FAR easier for options sellers to manipulate stock price since the outcome of the option depends on the stock price for a short period on expiry - which would seem to be easy stuff for cooperating MMs who are in partnership with huge options sellers.

        It is for this reason that I find some believability in this interpretation - i.e. when the outcome of a bet depends on the price of something for a very short time it is essentially a very odd or manipulatable thing to be basing things on - i.e. an unreliable indicator.

        So maybe better to sell options than to be buying them maybe ?

    • God ... I'm about to lose $10,000. Lord Help Me... Tomorrow I'm buying the september $7.50 call option.

      I'm f*cked ... whatever happens will happen.

    • If the trial data is strong postive, what do you think
      the stock will trade up to? what is the fair value for APPY if FDA
      is going to approve Appyscore in SEP? Very simple, buy stock here,
      you make 150% in two weeks, but the SEP 7.5 options makes 400%,
      if trial fails, stock holder lose may be 50% to 60%, option holder lose 100%.
      Risk VS reward, and how much confidance you have for the trial results?
      Buy according to your DD.

    • bigshootersports@sbcglobal.net bigshootersports Apr 26, 2010 5:59 PM Flag

      The Sept 7.50 calls would increase in time value even if the stock stays below 7.50. Whatever your paying for the option now is time value. As you get closer to Sept without any extreme price movement upward your time value will decrease. So if good news propels the stock to 6 or 7 dollars in May or June you would definately see your options increase in value even though you are still below strike price.

    • I just want to know why people are buying the 7.50 sep call options. It's a simple question. I'm just curious about the hooplah. wouldn't the SP have to go above $7.50 to start making any profits?

      dude bro ... like ... dude .... help me out here ... dude. I'm thinking of buying the 7.50 sep call options tomorrow. Just trying to get some info on them. The more risk the better right.

    • Dude, if your level of understanding is that low, maybe you shouldn't be buying options. just buy some common at market price and enjoy the ride. It's not too late to get in.

    • Have you even done your DD on this company?

 
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