re: AUPH - Aurinia Pharmaceuticals

.45 on the January 25s
Wow.

Whew rumors running wild!!

People are buying options at $45 and $40 for January 2024 expiration. Meaning they expect stock price to be higher than $40 by Jan 24.

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For the lay people, please explain what this means for AUPH.

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As the option seller of two contracts, someone paid me $26 to sell them 200 shares of AUPH at $40/share by next January.

I look at this as free money since I don’t see a deal happening at that high of a price. But nonetheless, someone paid $26 for the right, but not the obligation, to buy 200 shares at $40.
I, as the seller, collected the premium paid.

I also sold five contracts on $25 calls ranging from $35-36 each.
If AUPH gets bought out at $30 then the downside is I will have to sell those shares at $25 this capping my gains. But I got paid about $175 to take that risk.

I’d also be pretty happy to sell 500 shares at $25 regardless of a higher buyout. I’ve still got plenty left for the full amount, if that were to occur.
What I’m doing here in selling these calls (covered calls) is taking advantage of this latest rumor to make some guaranteed cash. If this rumor fizzles out as well, I can buy back all of those contracts on the cheap and then keep all my shares. Rinse and repeat.

After I sold the contracts on the $40s, the bid dried up and shrunk to .01 so there’s not any real belief that AUPH will be $40 by next January.
In fact I was going to sell 7, but only 2 got filled.

However, there is a lot more action on the Jan $25 calls, which suggests that investors are betting on at least an upper 20s buyout by then.

It is. I own 2 of them for 1.95

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However, there is a lot more action on the Jan $25 calls, which suggests that investors are betting on at least an upper 20s buyout by then.

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What I’ve learned in the last 2 years is that no one knows jack about what is about to happen. I followed AUPH and all the boards (Twitter, stock twits, etc) like a hawk. Every month or so, there was always comments like “June $24 strikes are flying off the shelf” or “big block of Oct $18 calls purchased”. Look at me…I bought $200k worth of calls purely on gut speculation.

My point is…a lot of these “investors” are just gamblers hoping for a grand slam, and 99% of AUPH shareholders don’t know if and when a buyout will happen.

You’ve just described why I’m now selling calls instead of buying them.

Holding $12 4/21 calls. I really need these rumors to make it run lol

Do you know if you can buy calls in an IRA. I do covered calls all the time but have never done regular calls. I have a Vanguard IRA and do not know the pros and cons of buying calls. Any advice appreciated.

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jerryc436

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Yes, you can buy calls in a Vanguard Roth.
Buying long calls and puts is level 1 options stuff, where I think CCs and CSPs are level 2.