NorthWest Biotherapeutics Inc (NWBO)

[gnawkz]

I agree. Options should be used primarily for minimizing capital costs and risks.

When buying naked call options, esp, for NWBO, it should be executed from the perspective of owning future shares without committing the full capital. Thus limiting risks and other missed opportunities.

For example, I own 50 contracts of NWBO Jan 2017 @ roughly $1.00 per contract. I don't feel comfortable dedicating $30,000 to buying up the 5,000 shares. I am much more comfortable owning $5,000 worth of options that represent the 30K shares.

In a worst case scenario, assume options expire worthless after 2 years and I lose all $5K. From a total risk perspective relative to what my NWBO planned holdings of $30k would have been, I would end up with a 17% loss. If it works, the I can purchase the 5,000 shares and solidify an entry point even if the shares rocket.

In addition, I have freed up $25K of capital and can invest in stronger companies (an MLP in this case) to collect dividends to generate income while maintaining 5,000 shares worth of exposure to NWBO.

Please note, numbers above are in range approximate.
The mistake is to use the full $30K on a single bet in hopes of a world changing payout.