Yes, all this could be nothing more than the semi-annual pump and dump it seems that AVXL cycles, through, although the stock chart clearly shows higher highs and higher lows over the past 3 cycles - which is a fairly bullish sign.
My point was that you hardly ever see pump and dump spill over into the options market, because as a seller of covered calls, I get to "keep" their money when the stock falls back to its range. It is one thing to hype up a stock for a short term gain and then dump it when the lemmings follow, it is quite another thing to buy my covered calls and get nothing in return when the stock closes beneath the strike.
My average stock purchase price of AVXL over the past 2 years has been about $2.50 and I has sold calls about every month on 3/4 of my holdings at anywhere from 0.05 (when the stock is 2.25) to 0.28 (when the stock was at 2.55); sometimes I have to eat a little of it back if I want to continue to own the stock but I still make the time value premium (the difference between the option offering price inherent value, i.e. the 0.28 option had an inherent value of 0.05 (2.55-2.50) and a time value of 0.23 (0.28-0.05) when I sold it.
Then last month something funny happened; I started noticing bids for the $5 contract. Eventhough I was losing out on a nice 8% premium for the month when the $2.50 contract had a time value of 0.20, I shifted some of my call selling into the $5 contracts, suspecting that something had changed. As I posted, my 300 contract limit order was snapped up in seconds at $0.15
To answer the other question, yes the price could be reflective of a covered call sale, but for that to be true there must have been a buyer. Just like a stock, when there is an open bid on the $5 option contract for May 17, there is a virtual "barker" out there saying - "hey all owners of AVXKL stock out there, if you give me the right to buy 25,000 shares of your stock for $5 (not the current price of $3.50) for the next two days, I will give you $1250 - and you still get to keep the profit from $1.50 gain on the sale if I chose to exercise my option); or in the case of the June 21 ... I will give you $3750... for the next 37 days.
I hope that diatribe answers the questions I have been getting messaged and happy to answer them. I once was new to the option market. Don't forget you can sell covered calls in your IRA! A great way to earn non-taxable income!
EB
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