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Exelixis, Inc. Message Board

tcubed_bus 6 posts  |  Last Activity: Jul 9, 2015 11:35 AM Member since: Oct 17, 2007
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  • Reply to

    What is holding this down? Is it the S-8?

    by johntappenstein Jul 9, 2015 10:59 AM
    tcubed_bus tcubed_bus Jul 9, 2015 11:35 AM Flag

    "Why aren't we flying ...."
    Who knows? Could be lotsa reasons. Main one, I suspect, is that a great technology, a gifted management team, and a handful of positive anecdotes, do not influence the buy/sell decisions of folks with dozens of millions of dollars under their control. These professional investors have thousands of stocks to choose from. NVIV, as a stock, is like hundreds of other biotech startups: negative earnings, thinly traded. Also, it has had quite a runup in price; statistically, it's due for a pullback. And the cash flow projections rest on the future "production rate" of spinal cord injuries of a certain type, times the dollars that each injury delivers to NVIV's doorstep. If all the company's Forward-Looking Statements come true, common shareholders will be sitting pretty. If not, well, that's life in biotech investing.
    HTH

  • tcubed_bus tcubed_bus May 28, 2015 9:36 AM Flag

    "...How would he make $12,000? I also assume he needs someone to actually buy his calls as well to make the money?"
    Yes. Looking at the transaction from the point of view of the option seller (and presumed owner of 50,000 shares of the underlying security), it is a simple matter to offer to sell 500 options contracts at a nominal .25 or better. The factor of 100 is a bit confusing; options are quoted at a price per underlying share, but traded in 100 share bundles.
    Thence the math: 25 x 500 = $12,500 changed hands in the transaction (plus commissions, of course).
    To be sure, there must be two sides to every transaction. And outside observers don't know who made the initial offer. But, after the fact, it doesn't matter: a trade was made, and that is that.
    HTH

  • tcubed_bus tcubed_bus May 28, 2015 6:39 AM Flag

    Another way of looking at it: A holder of 50000sh of NVIV, bought at some bargain price and now worth $650,000, decided to make a quick 12 thousand dollars (25 x 500), and sold calls accordingly. The seller figures: maybe the stock will pop a couple of points in the next month. If it doesn't, I made a tidy sum (and I can do it again next month). If it does, that's life; I'm still rich ($750,000).

    Could be, the seller is the wise one in this scenario. Time will tell.

  • Reply to

    Options are now available.

    by twojugglers May 15, 2015 4:42 PM
    tcubed_bus tcubed_bus May 16, 2015 11:03 AM Flag

    "...what does this mean..."
    Say you own 100sh NVIV, and you paid $12/sh. You could make a quick $40 or so (commissions, remember) by selling a July 15 option on NVIV. And in two months, you would be free to do it all over again, thanks to the discouraging mathematics of options buying. Great! An easy $240 per year on your $1200 stock holding. 20%!!

    In reality, you would be working hard for that $240. At the very least, you would be losing out on the appreciation of the stock you bought in the first place for its speculative potential. All for a crummy $240.

    There are brokers that specialize in options that grant beginners some freebie trades to get you going. For cheap options like NVIV's, that can help ease the pain of commission charges. But it is hard to get rich trading options. Check out the sales volume of the July 15 option yesterday: 7. Not much room for great wealth accumulation.
    HTH

  • Reply to

    Options are now available.

    by twojugglers May 15, 2015 4:42 PM
    tcubed_bus tcubed_bus May 16, 2015 8:01 AM Flag

    "What impact do/can options have on the stock?"
    Continuing my response to the above, the official answer is: None, the options trade price is derived from the price of the underlying security.
    The reality is that options are traded by experts with lots of money at stake. You can see that the markets for options and stocks, theoretically separate, get somehow strongly coupled as options expiration time approaches. You can see for yourself: it's common for the underlying's price to fluctuate in a narrow range around a popular option's strike price. Why that happens is anybodys' guess, but imagining that rich and powerful people have an interest in certain outcomes would be a reasonable place to start.
    HTH

    Sentiment: Hold

  • Reply to

    Options are now available.

    by twojugglers May 15, 2015 4:42 PM
    tcubed_bus tcubed_bus May 16, 2015 7:45 AM Flag

    "Can anyone explain calls and how they work? Why do they impact stock?"
    Sure. Options are derivative securities, that is, they derive their value from some underlying financial instrument. Options in the US are valued according to a formula derived from Black and Scholes, which takes into account an option's diminishing value over time (i.e. zero at expiration). Options are pure derivatives, mathematical constructs. But they can have value in the real world to hedgers and speculators. A call option is a right to buy an underlying at a certain price, the strike price. So, to speculate that a stock currently at $13 would trade at, say, $17 in the next 3 months, one could buy a August 15 call option for $1 dollar. Then, the various possibilities of the underlying's price play out over time. Of course, the speculator is hoping for a great increase in the underlying's price: above the strike price, the option's price would increase dollar-for-dollar. At $17, the option to buy at $15 would be worth $2, etc.. You could double your money. Yay!

    Before you go buying calls at retail in the hope of living rich, you must be aware of a few harsh realities. The first, and most sobering, is the fact that some 90% of options expire worthless. Check out the stats on the Chicago Board Options Exchange for the details (and lots of practical info.). Another thing: experts who make their living trading options are your competition in a zero-sum game. You think you can beat Michael Jordan in a pickup basketball game? Think again.

    But there is hope. For every buyer of options, there is a seller. If you happen to own an underlying, you can easily and safely sell covered call options and make the premium yourself (minus commissions of course). For options trading in nickels and dimes, it isn't worth bothering with for retail traders (i.e., anyone reading Yahoo message boards). But if you can make a buck or two every three months on a stock you bought for $15, that can be a quite pleasant.

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