There seems to be confusion about buying and selling calls. Also about the movement of the stock price. On the later, Omkt was trading at 6 last month and because of speculation and momentum players, the stock ran to 27 and back down to 10 and up and down. It may move up from here if the players decide to run it again, or it may return to single digits. If you buy calls, you are gambling. If you have some spare cash which you can afford to lose, buy some Jan. 15 calls. Right now the stock is not trading on fundementals (few internet stocks are) and in fact may dissapoint this quarter. Any buy of Omkt right now (calls or the stock) is pure hope for the future. No good track record right now. Fact is, they led us to believe they were okay with earnings last quarter, and dissapointed. They may dissapoint again.
On calls, you can SELL covered calls which means you own the stock and want to get income on your capital while you wait. Usually you sell them because you do not believe the stock will spike any time soon and 'while you wait' you want to be making money. You also can Sell 'Naked' calls. You do this if you think the stock is not going anywhere. I could tell my broker I want to sell 10 Jan. 15 calls. The house pays me maybe 1000 dollars. If the stock stays below 15 through expiration in Jan., I keep the 1000. If it goes to 20, I will have to pay the house 5,000. It is a BEARISH sign if there is tons of call activity on a stock. Finally, you can BUY a call. That gives you the right to the stock at a certain strike price. Most calls bought retire useless. Generally this is a poor mans game. My personal recommendation would be to stand back from OMKT until it gives us one quarter of beating estimates. It would show it is on track. Or if you are convinced it is a must buy (it sure has tons of potential), buy some of the stock here, knowing full well it may drift down to 6,7,8,or 9. Hope this helps! Steve D. |
