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While I too would be tempted by that ratio, your down side if you buy the calls is your entire investment. As for the ration being bullish, you still cannot be sure that the calls were not bought by short sellers protecting their downside. And you have to remember that for every call buyer, there is someone selling who is betting that the options will expire worthless. Having said all that, I am personally very tempted to buy some of the November calls based on the action, or even the stock itself. BUT, I think the more prudent course of action to wait until after the news is released because there is room for a a nice run up into the 20s where the stock was prior to the FDA's failure to approve when expected. It will not happen in one day. BTW, I spoke w/ the VP for investor relations and your $6 cash per share value is somewhat misleading. TYhe company has 133mm in cash and security equiv., but it also has a 60mm cash burn rate per annum. It has 2 yrs of cash left with very little revenue and I think only one other major product coming up for FDA review in December. So I would think approval of Myotrophin is very important to CEPH's long term prospects. You know, this is a long dissertation and I am not even in this stock. Good luck with whatever you do, hope you make a boat load of money. |
