When you can acquire SDRL leap options maturing in January 2015 [NOT 2014] priced at only a nominal premium over to-day's price, are they trading at fire sale levels? Urge do your own research + see if there are opportunities here for mega gains in the 400 to 500% class?
It is very hard to find opportunities of market being inefficient and sadly this isn't one of them. The options are so cheap because the company pays a very high dividend. The dividend payout is discounted in the option price for Calls. Basically the person writing the call gets to keep the shares until the particular date in future when the shares get called. the option buyer gets the discount in call price because he doesn't get those dividend despite being long on the stock. On the other hand the puts get the dividend added to them and hence trade at a premium. This is why the calls seem to be on sale when compared to the puts.
Doesn't this mean that despite the "loss" of the dividend the call owners still get the capital appreciation if the stock goes up
If the stock appreciates by more than the dividend its still a win but with less leverage and less risk of capital?
I have a considerable investment in Seadrill and looking to buy some put protection around the 40 strikes but they are a little too rich for me at the moment maybe can scoop some up on a spike in stock pre-earnings / divy?