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Biotech / Medical : Immunomedics (IMMU) - moderated
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To: me otter who wrote (7926)10/20/2009 8:20:59 PM
From: li3511  Read Replies (3) of 63324
 
> we are likely to visit the $3.78 area before this down leg is done

Here's an inside tip: slightly more than 1/3 of my Nov 2.5 calls were assigned this morning. That is, I sold the calls over the summer, and someone exercised them to buy the stock from me at 2.5 about a month before the options expired.

It is very unusual, absent a dividend play or something like that, for in-the-money calls to be to be exercised so early. Exercising an option kills its time value, and a smart holder would normally rather trade the option than exercise it.

Even though it sounds like someone is buying the stock, it's actually a very bearish indicator. Presumably the buyer immediately sold those cheap shares at the market price for a profit. Unless the counterparty was an amateur or crazy, it's saying that the market ascribes little or no value to the option as a cheap surrogate for IMMU shares -- and that it fears that the stock price can go below 2.5 (making the call intrinsically worthless) within a month.
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