The guy wants to buy in at $2.40.
Let's say I've got $8,000 I want to put to work.
If I write the put like I proposed, I can afford to write 20 and receive $160.00 for each contract for a total of $3,200.00 in cash.
8,000/400 = 20
20*160 = 3,200
At expiration the most likely outcome is the stock under $4.00, and in that case, I will end up owning 2,000 shares and still have my $3,200 for a net cost of $2.40/share.
Should the stock go to $4.00 or higher, the options will expire and I'll just keep the cash. That gives me a $40% net on a trade that lasts 6.5 weeks for an annualized return of 320%.
I'll take that $320% any time. But, what I won't accept is ZN at $2.40, so it's too risky for me.
But it's still a heckuvalot less risky than participating in that terrifically bad "rights" program, and less risky than buying the shares outright.
As to long calls, I don't know your strike or the date so I don't have the data to analyze it. But generally buying a derivative is a bad idea unless it's part of a hedge or spread.
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