Replies to post #49835 on Anavex Life Sciences Corp (AVXL)

[WellSpring]

The price action is concerning to me, even on a 6 month time frame. However, I personally feel good about the July options because of one of two possibilities: Beginning of Phase 2/3 or Partnership. Both are on the table this year, as explicitly stated by the company, and could pop the price. I don't see the phase 2 for the "additional indication associated with cognitive impairment" bumping the share price though.

[Millstone]

Hi street - I'll try to formulate a short answer to your excellent questions:

1. When trading volatile stocks, the premiums are higher but there is more opportunity if you are actively monitoring the stock.
2. Yes, there is some inclination for the strike price to act like a magnet, but there is a push pull effect on both sides. I only worry about that effect when there are a lot of contracts outstanding. In AVXL, the numbers of options outstanding are extremely low, hence the correlation is low.
3. Since the share price of AVXL is so low (in the opinion of all who believe in the science), the price might not incline somebody to consider buying options instead of shares since options have a time decay. However, I have confindence in the near term price appreciation and a desire to control more shares with less principal risk, in this case 4-6 times the leverage.