OTThe calls you sold must be exercised by the owner before March 5, 2005
Options expire on the third Friday of the month, which is March 18, 2005 in this case. It's fairly rare for options to be exercised early, since time premium is sacrificed, so essentially if CTIC closes below 10 on that date, then I keep the stock, and, of course, the premium. If the stock closes above 10, I still keep the premium, of course, but not the stock. So what I am doing is capping my potential upside at strike (10) + premium (2) or $12, which seems fair for I stock I am buying today for $7.98. After all, that works out to a 4 month gain of over 50%, which is not bad on an annualized basis. <g>
you just gave yourself $2.00 worth of downside protection
That is how I look at it.
How often do you get the asking price when you sell a call?
I don't usually put limit orders at the asking price. I sometimes even accept the bid price. Depends how hungry I am for an immediate fill. BTW, I strongly suggest interactivebrokers.com because their option commission is a mere $1 per option with a $1 minimum. Other brokers often charge 3 or 4 times this much.
Isn't that a huge percentage gain you just got by selling those calls?
It is indeed, and there's the rub. CTIC is expected to report results for an important clinical trial during 1Q05. It is a huge binary event. If things go well, the stock could go to 15. If not, it could go to 5, or worse. I have rarely seen such high implied volatility. When I do, I usually try to monetize it.
Sam |
