I am perplexed about what is going on with the AVXL share price, option premiums, active buying, active selling of AVXL shares. Yesterday, as the stock price was dropping precipitously overall active buying of shares was exceeding active selling.
At the same time, December 2 call options were still trading at high premiums with only a few days to go to expiration. I sold some covered calls yesterday at good prices. I sold some more today at good prices. For example, I sold a few $17.50 December call options today at a price of $1.00 per share, 10 $17.50 strike price option contracts at a time for $1,000 with a few days to go before expiration. Another example, 10 $27 strike price option contracts at a time for $450 with a few days to go. Interestingly, when I sold these contracts today, AVXL was trading as low as $8.80 per share. I sold one December option contract at a time at first as a test, and then increased the amount of contracts to 10 at a time. All of the calls I sold were covered calls. I still have enough AVXL shares that are not covered. Selling these calls at good prices is a little tricky, but I start at bidding high and gradually cancel and replace with lower prices, but still at a good premium, until I get filled.
Either some one is going to pick a few of my shares at a cheap price, or I am going to pocket, for example, a 5.7% gain in three or four days on the $17.50 calls + a pretty good long term capital gain between my cost basis for these shares and $17.50. I have been in this stock since 2015, buying and selling shares as well as selling covered calls, puts, etc. Investing in Anavex has been a continuing education for me. If I pocket the premiums from the December 2 covered calls I have sold this week, I will be wondering why some one bought the options I sold. If any of my covered call option contracts get exercised, I will be somewhat surprised at this juncture due to the steep price decline in share price so far this week.
For the stock to reach $17.50 per share in the next few days means the price has to double, and to reach $27 per share it is approximately a tripling in share price from today.
So, why more active buyers than sellers yesterday with the big drop in share price, and why the high option premiums with only days to go to expiration? Which brings me to question some of the things I have heard about the big price drop on Monday along the lines of “the market knows such and such” and other things said about what smart, experienced investors know. I have been investing in the stock market since 1968. In the last few years, I have learned that I do not know much of anything that may happen with this stock in the next few days or at any point in the future. Frankly, the older I get the more I realize how little I know period.
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