I don’t buy many Long Calls but I was just filled on 5 Amarin (AMRN) January Calls.
This afternoon I was watching CNBC. During the “Unusually Activity” segment, John Najarian mentioned a few stocks that had unusually Call buying. One of the stocks was AMRN. I’ve been in the stock before with both owning stock, and buying and selling options. Najarian reported that many of the Nov $17 Calls are being bought. I looked at the chart and I liked what I saw. The stock looked like it was on a down trend, hit support, and started up. At the time of Najarian’s report the stock was at $14.65, up about 70¢ on the day, which is about 6%. By the time I placed my order the stock was up another 20¢. It took about 2 hours for me to get filled.
When I looked at the option chain, it looked like the option everyone was buying was the Nov 15th $17 Call. However, I don’t like to buy options with an Expiration Date that close. And I like a better Delta. I looked at the Jan 17th, 2020 $15 Call. With a Strike Price closer to the money you get a better Delta. The stock was in the $14.80 area so the $15 Call is close to being At-the-Money. The Delta of the Jan 17,2020 $15 Call is .60. This means the option will increase in value 60¢ for every $1 the stock moves. Since my option in a $15 Call and not a $17, and the Expiration Date in further out that the Nov option recommend by John Najarian, my option is more expensive. I have more Intrinsic Value and more Time Value, so my option is less risky.
Buy to Open 5 AMRN 1/17/20 $15 C @ $3.20 ($1600)
I paid $3.20 for my option, I believe the Nov $17 Call was selling for $1.60. I laid out more money but I own this option until Jan 17th.
I plan on being in this option for about a week or 2. I would like to make $1 on the premium and get out. That would give me a $500 profit.
There are a few terms mentioned in this post you should be familiar with if you want to buy options, Long Call, Delta, Intrinsic Value, Time Value.
If you look at the option chains for the next few months there is a lot of action with all the $15, $16 and $17 Calls. I think the activity really picked up since John Najarian’s report.
Any questions on buying options send me an email.
Steve
The Options Coach