Buying Calls. A call option is named as such because the owner of the option can call on the seller of the option to make shares of the stock available at the strike price, such as $1.00.
Options expire on the third Friday of the month. Usually they are bought only out to a distance of 9 months, but they can be bought farther out than that if a seller can be found by the broker that is willing to offer his shares at a more distant date.
Each option contract controls rights to 100 shares of stock.
As an example, say that stock ABC is trading for $27. Previously, when the stock was earning good money, it traded at $34-$38. It's sales have been off and so its price is down. New management has turned things around, and you believe that its earnings report next week is going to show a big jump in profits, so you are thinking of buying the $30 call. However, it looks like a lot of people have the same idea. The $30 call price for three months from now is $7. Even if the stock went up to $38, of which there is no guarantee, you would barely make enough to cover brokerage fees.
But next month's $30 call only costs $2. You can buy this call for $200. Most likely you would buy 10 calls (which lets you control 1,000 shares) for $2,000. If ABC goes to, say, $35, you could then close out your $30 options and receive $5,000. Minus the $2,000 it cost to buy the option, you would have a profit of $3,000, a 150% profit.
Now let's go to NAK. The last time NAK traded at $1 was years ago, so there should be no one that is willing to buy a November $1 call because that is only one month away, and NAK is way below $1. There were 5,212 contracts, where people have bought NAK Nov $1 calls, but NAK was at + $0.80 less than 9 months ago, so people could have bought calls back then.
Buyers have recently bought 969 calls at .10 (for a cost of $9,690) betting that by Nov 15 (the 3rd Friday in Nov), NAK will be higher than $1.10 a share.
Going 3 months out, the Jan 17 2020 call, 554 calls were bought at .15 ($8,310), betting that NAK will be over $1.15 by 17 Jan.
(There were no trades for Dec $1 calls, and no trades for Nov, Dec, or Jan $2 calls)
Either the buyers are wildly optimistic, because there is no news expected in the next month, or even 3 months, or they know something. Somehow, I doubt that they know something, such as a pending joint venture. If someone did know something, I would think that the $2 calls would also be trading, because they would be very inexpensive, and if a joint venture was in the offing, NAK's price would go way above $2, especially 3 months from now, Jan 2020.
Also Monday's Bid/Ask is right around Fridays closing price.
Closed .5673 Bid .551 Ask .570
But maybe there is something going on. If NAK's price starts taking off, it might be worthwhile to buy more shares.
I will also start keeping track of option trades.
AI
