Replies to post #57116 on Anavex Life Sciences Corp (AVXL)

[GAB]

Don't forget the other side of the trade where the call writer (seller) is counting on the shares to be at or under five in July. Options that far out are risky.

[BAR123]

So as a follow up on the options question from Xena. There are now 1,930 contracts of the July 10 strikes in open interest. Either someone put down $20K yesterday to buy 510 of them in hopes that the stock will be well above $10 or they wrote covered calls meaning they collected $20K and they will lose the stock if it goes over $10 or if under $10 they just keep the premium.

I believe that someone is betting they stock will be close to $15-$20 by the third week in July. If they were writing covered calls why risk losing your shares at $10 when the big pop to much higher pps is coming. If you own or control 510 contracts ( like the one person did yesterday ) it means that if you were writing covered calls you have 50K shares in hand. Why risk losing them for .40c. Or you are just buying calls for .40c and now control 50K shares that you can that you can buy for $10 or if the stock goes to $20 by expiration those 510 contracts would be worth $500,000. Not a bad bet for only plunking down $20K.

[XenaLives]

Do does this chart explain the $10 options bet you noted?

2 things on the options. Just visually the calls out weigh the puts significantly and the 510 calls bought for July 10 strikes is very telling. We will see what the open interest is tomorrow as it should be 1,416 plus the 510 on the volume for today so 1,926 should be the new open interest numbers. Someone is betting $20,400 (510 calls at .40c each = $20,400 )that the stock will be over $10 by the end of the 3rd week in July. I think so as well. If it hits $15 the guys will make $250K.

I think I am reading this correctly.