The longer time they take is more opportunity for management to collect salaries and allow for options to vest.
mtmcareer just posted that he sold a few May $17 calls.
I am tempted to do the same but am scared off by the size of outstanding options and the possibility that the buyers may know more than I do. I satisfy myself with the crumbs by selling May puts.
Regarding these May 20 $17 call options. The size increases and the pricing remains firm despite the ticking of the clock. Clearly this is a bet on a pop in price as a result of the earnings release. It tells me there are some "knowledgeable" buyers who appear to believe that this will pop to over $17. If they were less "knowledgeable" they would probable settle for the $16 strike price.
I can't see any adjustment if sold for cash and ceases to exist. If sold for more than $17 option holders will exercise to reap their reward. Any option holder can exercise well before expiration. If sold for less than $17 then all options with a $17 exercise price will expire worthless. It appears that adjustments are only applicable when another company's stock is involved.
Will repeat my reply.
Per a Fidelity representative he has never seen a claw back in an option premium. There could be an adjustment in the option price or an option substitution if another company were involved. Can google "theocc.com" for a specific transaction but not a hypothetical one.
It appears that the ACAS call premiums cited reflect a risk that ACAS could be sold for cash but also reflect a significant chance that another company will be invilved and the options would then be adjusted or substituted.
Why are investors selling $17 call options for this May for about 25 cents when they could be selling the January '17 calls for about $1.10 or the January '18 calls for about $1.75? If ACAS is sold for cash or liquidated in the near term then effectively all of the options would expire.
Agree. Hard to reconcile with sizeable $17 calls outstanding for May 20. It appears that the option players expect some positive news with the earnings release
I must admit that I am confused as to the present status of the assets and operations of ACAS and where this sale process is going and the timing. For example, you assume NOI of 30 cents per share. Yet, it would appear that this would be difficult given that earning assets are being sold and I assume there have been minimal layoffs. Further, what about expense of the sales process such as lawyers and bankers (and bonuses to employees)?
We are all on the same page with your $19.07 NAV FD at 1Q'16 before operating results for the quarter. The author, Jaded Consumer, starts with '15 YE NAV FD of $18.68 then adds 39 cents for buybacks. I did the buybacks first and then the options and came up with the same $19.07. The author's computation for Q!'16 operating results is a little confusing but results in $19.27 at best based on assumption that it would track the S&P 500 1st Q'16 performance (although he adds only 20 cents rather than the about 38 implied by his 2% assumption).
You are estimating 90 cents from operations bringing your estimated of NAV FD at Q'16 to $19.97. Clearly your computation is much more specific than the author's assumption of tracking the market. I certainly hope you are correct.
Also, the author appears to be concerned with the "value" of ACAS buy never mentions ACAM, which could be worth more that the ballpark $4 p/s included in the assets
This is fully diluted reflecting stock option exercises. Author states he asked management why they do not report NAV reflecting the stock option dilution. The rely, "because we don't have to". This speaks volumes about this management.
As the buybacks continue to decrease the number of shares outstanding it increases the dilution from stock option exercises. Assuming end of Q1 NAV 20.50 with 220 million shares outstanding for total equity of $4.51 million. YE 2015 there were 28.4 million options outstanding at an average exercise price of $7.97 per share, excluding .8 million at $39.41 price and 3 million at 16.69. (5.8 million not vested then but assume they will be). After exercise there would be 248.8 million shares o/s with equity of $4.736 (including $226 million from exercises for an NAV p/s of $19.04 and a dilution p/s of $1.46.
If the end of Q2 results in NAV of $21 p/s with 200 million shares o/s. The option exercises will increase that to 228.4 million shares with $4.426 million of equity ($4.2 million plud $226 million from exercise).. This results in $19 38 NAV per share for a dilution p/s of $1.62.
At least a month but generally not more than 2 months. I want a purchase price (put strike price less premium received) of under $13.50.
This scenario works best when one trades out of the option on the pop in the price. The spreads on these options make this an unreasonable strategy. I have been an aggressive writer of $15 and $14 puts when the stock falls below $14 (all very profitable). But I held to expiration rather that give back substantial profits by buying back the puts at an unreasonable ask spread.
They options expired worthless or I accepted the put of the shares.
Bottom line: don't trade theses options: hold the position until expiration..
"Pretty cheap insurance". Against what risk? Perhaps a 25% crash in the market?
Probably not because there are better ways to hedge that risk. This appears aimed at a possible decline in ACAS to about 12.50 or lower in the next 6 weeks. .This would require news of no interested buyers and a sharp downward adjustment to NAV. Hard to believe.
These ACAS options aren't for trading but are for holding until expiration because of the wide spreads between the bids and asks. Buyers and sellers have to have convictions.
I agree with you. I didn't intend that as a precise or a precise estimate. But many on this board ignore the dilution when computing the discount to NAV and then discussing possible sale targets.
I agree with you that the best strategy is to wait. However, the question is for how long. Certainly going out 6 months or more would indicate a poor level of interest by prospective buyers and would run an increasing risk of a recession and/or a bear market.