PEI ---- april calls...

Discussion in 'Options' started by love2puck14, Oct 16, 2009.

  1. what is going on with PEI (pennsylvania real estate investment trust)??? .40 cents for calls that are 5$ (62% upside for the seller) OTM and expire in 6 months... approx $8 stock... 10% annualized (not including dividends) for calls that are that far OTM???? i don't get it... any thoughts???
  2. hah! first post... sweet

    implied vol in the name is quite elevated, there may be some impending news coming out-- earnings up in a week or two, but I don't see why vol higher that far out...

    My play? Sell a time spread:

    Buy Nov 8 Calls for .60
    Sell Apr 8 Calls for 1.60

    Credit a buck, want it to break 7 in a month.

    Will def look at over the wknd

  3. i know their story well... they need to re-finance a big loan by next march... but it just seems to me like a HUGE price to pay for a 62% OTM 6 month call...

    my thought is that people must be speculating on them refi'ing ...
  4. Do some reading about how volatility effects option prices. When the implied volatility of a stock is around .75 then 6 month calls that are $5 out of money will be at that price.
  5. Imp vol is quite elevated? It was double these levels 6 months ago and triple late last year. It's actually in the low end of its year range.
  6. I misspoke, I was not referring to IV in general, but how April IV much higher relative to other months.

  7. ok... i've looked for other examples and havent really found anything that looked like this...
  8. PARD is 6.87

    Mar 15 call is .70 bid

    Not a recommendation, don't know a thing about it Just an example of what high IV does to price