re: I'm seeing a bargain with this stock, what am I missing?

quote:

---

So they are not buying them up front?

---

no it's an option to buy from someone else. So if it goes to $10, you can still buy at just $9.

quote:

---

ETA: How come they are pennies for a share?

---

Other than answering because the Black-Scholes Options Pricing Formula says that is what those options are "worth" ( ), what it really means is there is a very low anticipation that the price of AA will exceed $9/share before April 20.

I think you're confusing the option price with the share price.

The option just gives the buyer of the option the RIGHT to buy the shares at $9 on or before April 20. Options are sold in 100 share contracts, so for $4.00 ($0.04/share X 100 shares) the buyer of one option contract is just locking in a price at which he can buy the shares on or before April 20 and that locked-in price, referred to as the 'strike price,' is $9/share.

Of course the only reason the option holder would exercise his option would be if the price went over the strike price. He would not exercise his option to buy the shares at $9 if the current market price was, for example, $8.23, which is what AA can be bought for now as I write this.

Only an Ole Miss graduate would buy something for $9 when he could buy the same thing for $8.23 on the market.