SIRI Options

[flybynight]

With the merger on the brink of announcement is now a good time to buy options for SIRI? Cramer says either way SIRI is the long pick.... your thoughts?

[Rambis]

probably best to sit this one out.

[aiki14]

January of '09 2.50 calls are only 1.20 at the moment. That seems like a reasonable risk reward with so much time left. Of course, turn the clock back 1 year and I might have said the same thing.
Could be worth a look.

[dadooh27]

It would certainly seem that there has been more at play in this merger over the past year than meets the eye. The lobby for terrestrial radio is strong and has most definitly had an influence on the decision to allow or reject the merger. Pressure is building for some sort of move to be made and no matter which way the go, and I believe they will approve at this point, IMO it is a win for SIRI.

The benefits are somewhat obvious on the approval side but even if there is a negative ruling it releases SIRI to really get down to business and they should do well.

The risk would appear to be low enough to be attractive here.


Dadooh

[flybynight]

Ok thanks for all the input. On a side note what are the tax implications if you buy an option, lets say a Jan 09 - $2.50 for $1.20 and end up exercising.

Do you take the loss of the cost of the option and the gain when you cash out of the stock??
i.e. I buy 100 Jan 09 calls @ $2.50 for $1.20 and in Jan 09 the stock is trading at $4.50. I would then want to exercise the option and stay in the stock for a longer period. For the taxable gain do I have to report the buy at $2.50 and wait till I sell or can I report the buy of the option at $1.20 and use the $.80 gain as the sell basis of $2.

Thanks

[aiki14]

Ok thanks for all the input. On a side note what are the tax implications if you buy an option, lets say a Jan 09 - $2.50 for $1.20 and end up exercising.

Do you take the loss of the cost of the option and the gain when you cash out of the stock??
i.e. I buy 100 Jan 09 calls @ $2.50 for $1.20 and in Jan 09 the stock is trading at $4.50. I would then want to exercise the option and stay in the stock for a longer period. For the taxable gain do I have to report the buy at $2.50 and wait till I sell or can I report the buy of the option at $1.20 and use the $.80 gain as the sell basis of $2.

Thanks

If you exercise there is no gain and the option premium is added to your basis.

[flybynight]

What about the other way taking a loss? Lets say the stock is worth $2.60 next year and option is at .10, but I try to exercise and hope to recoup losses later?

[Florida]

January of '09 2.50 calls are only 1.20 at the moment. That seems like a reasonable risk reward with so much time left. Of course, turn the clock back 1 year and I might have said the same thing.
Could be worth a look.


So if you buy the Jan '09 2.50 calls, sell the out of the money front month calls against it each month to off-set your cost. You will limit your potential gain if and when a big moves happens, but in the meantime, you are bringing in "rent" on your position. (feb 4.00 closed at a dime yesterday)

[flybynight]

Thanks for all the input and hope people were able either learn or buy the stock over the past week. I think it is a good play and look forward to news regarding the merger.

Cheers :beerglass:

[wallstreetsedge]

What about the other way taking a loss? Lets say the stock is worth $2.60 next year and option is at .10, but I try to exercise and hope to recoup losses later?

correct! or you can sell out the contracts or call your broker and tell them to let them go worthless - sometimes expenses could be more than the position. also if an option is in the money by 5 cents or more, theyre automatically excercised unless you say something

a stock that is that cheap, id rather recommend buying the stock and selling calls against them.

[flybynight]

Time for a good run tomorrow. Lets hear some good news!

[niketennis1]

The XM/SIRI merger will get passed. It would be total BS if the DOJ doesn't pass this merger. I have all of my money riding on SIRI (I'm a true speculator) because I really think this merger will get passed. After the merger is complete, expect the combined company to be amazing. If the merger doesn't get passed though, I would definately short XMSR because the company will go bankrupt before SIRI. The merger will get passed though so i'm not too worried. I'm just hoping the merger gets passes somewhat soon because it really pissed me off that they can't pass a merger for 2 companies that don't even make money yet (how the hell is that a monopoly)? I've been waiting for 3 months holding onto SIRI and would really like to start trading stocks more often after the merger.

[netwrangler]

I'm just hoping the merger gets passes somewhat soon because it really pissed me off that they can't pass a merger for 2 companies that don't even make money yet (how the hell is that a monopoly)? The obvious question is:
What makes you think that two losing companies can combine to make a winning company?
Well, sure, there are ways where that could happen.
But there are also many ways where it could not.

The SIRI / XMSR merger seems to me to be a total 'day-trade' play.
The fundamentals suck, and the technicals don't count because it all depends on the 'news'.

Good luck. I'm not swimming in that pool.

[niketennis1]

I'll tell you how 2 losing companies will combine to make one winning company. First off, XM and SIRI willn't have to compete with each other so they combine customers, combine radio stations (howard stern and martha stewart, nba nfl and nascar), and they will not have extra expenditures for things such as commercials because they don't have direct competition in the satellite radio market. Both companies may suck now, but that doesn't mean they will in the future. As one whole company, they will be dominant in my opinion. I'm guessing they will combine to have something like 8-9 million subscribers. I have sirius in my car and its worth the money. People that own satellite radios will never switch back to normal radio because it sucks when compared to satellite radio. Netwrangler, its ok you are not involved in SIRI. I'm in the stock market to make money, not make 3% on my money for 1 year. You have to speculate to make money in the stock market IMO. The merger will get passed anyways so it really is a safe play imo.

[netwrangler]

I'll tell you how 2 losing companies will combine to make one winning company. First off, XM and SIRI willn't have to compete with each other so they combine customers, combine radio stations (howard stern and martha stewart, nba nfl and nascar), and they will not have extra expenditures for things such as commercials because they don't have direct competition in the satellite radio market. Both companies may suck now, but that doesn't mean they will in the future. As one whole company, they will be dominant in my opinion. I'm guessing they will combine to have something like 8-9 million subscribers. I have sirius in my car and its worth the money. People that own satellite radios will never switch back to normal radio because it sucks when compared to satellite radio. Netwrangler, its ok you are not involved in SIRI. I'm in the stock market to make money, not make 3% on my money for 1 year. You have to speculate to make money in the stock market IMO. The merger will get passed anyways so it really is a safe play imo.Well, now, and the same to your horse! [to quote Bob Newhart] :tongue:

I suppose, in your unique vituperative style, you did answer my question, which was, "What makes you think that two losing companies can combine to make a winning company?" Please note that I followed that question with,
"Well, sure, there are ways where that could happen.
But there are also many ways where it could not."

The point I was trying to make is that approval of the merger may be a necessary, but not a sufficient condition, for satellite radio, per se to prosper.
What I hear underlying many of the posts on this subject is a belief (assumption?) that the company that results from the merger will [automatically] be viable.
I think it will take more than one merger to breath financial life into satellite radio.
NOTE: I agree with you, niketennis1, that the merger should go through.
I see no reason why this should be viewed as monopolistic or anti-competitive.

Now, let me give you some personal background:

I am an avid XM listener. You are correct that satellite radio is far superior to regular FM. This is certainly true in my home town of Thousand Oaks, CA, where we have, perhaps, a handful of FM stations with a clear signal. This is especially true when I am on the road. I mean, I love the folks up north in Paso Robles, but that area does not offer a rich selection of FM stations.
So, let me be clear, I am not dissing satellite radio, the product.
My disparaging remarks are directed at the satellite radio business model.


For some years in Corporate life my job [and sometimes my title] involved forecasting technology. I gotta tell you, geophysicists can use up MIPS, Megs, and Megaflops like there's no tomorrow. You wanna make sure you are giving those cowboys the right horse to ride [uhh, the right computer]. My job was to figure out where the technology was going, and make sure the right computer was there when needed.

My 'take-away' from this experience is a jaundiced view of niche technology.

Satellite radio is a very good product living in a technological niche. It needs to have the blessings of the car companies to prosper on the road. At home, it works much better if it is using someone else's antenna — DirectTV, for example — or coming in over the internet.

The Satellite Radio mobile application is facing competition from GPS apps, iPod and Bluetooth links, and car-mobile internet apps.
I see convergence here.
'Convergence' has been a cliché in technology since the '70's to my knowledge.
Two things I have learned about convergence:

Convergence happens more slowly than you might think, and far slower than the popular press would have you believe.
But convergence [U]does happen, and niche technologies get swept up in the process.

So, how does all of this relate to trading in SIRI and XMSR?
Well, I see two possibilities:

The merger goes through. After that, a third party buys the resultant company and incorporates the product into a 'personal/anywhere' package of VoIP, eMail, IM, DVD OnDemand, and [oh, by the way] Satellite Radio.
Someone buys one of the players before the merger goes through. The purchased company become the [oh, by the way] Satellite Radio portion of the third party's offering.
So, if you are looking at SIRI or XMSR, I still believe that fundamentals don't count and technicals don't count. This is a 'news' driven market.

Again that doesn't mean you can't day-trade these stocks.

It does mean that I choose not to trade them [day/week/month/year]. I have better opportunities in other markets.

...which brings me to...

Netwrangler, its ok you are not involved in SIRI. I'm in the stock market to make money, not make 3% on my money for 1 year. You have to speculate to make money in the stock market IMO.This quote has some interesting implications.

Do you really think that there is no middle ground between a 3% return and 'speculation'?
Do you really think that I am a doddering old man content with a 3% annual return? Frankly, I doubt you think either thought.
That said, if you do, "...and the same to your horse." :mrgreen:

[flybynight]

Great breakdown of core issues NetWrangler. I hope that the companies prosper in the long run.

Thanks for the insight of a 3rd party competitor to offer additional services.

Very helpful!

[niketennis1]

Newtrangler,your probably not as young as me so you don't see siri as a good risk reward play like me. I think that a merger will make XM/SIRI a good company that will become profitable in the next few years. Without a merger, I see XM going out of business, and SIRI having a monopoly (not a dominant one) on the satellite radio business. I'm planning to sell my shares of SIRI after the merger if it occurs because I don't feel like waiting for 2-3 years for the companys to produce a profit.

[yupyup]

Any thoughts on what the SIRI stock will move to?

[netwrangler]

Newtrangler,your probably not as young as me so you don't see siri as a good risk reward play like me. I think that a merger will make XM/SIRI a good company that will become profitable in the next few years. Without a merger, I see XM going out of business, and SIRI having a monopoly (not a dominant one) on the satellite radio business. I'm planning to sell my shares of SIRI after the merger if it occurs because I don't feel like waiting for 2-3 years for the companys to produce a profit.
As I recall, you were considering accepting a tennis scholarship a little while back.
Two years ago, after a partial knee replacement, I made the decision to give up tennis — a game I had played for almost 60 years.

The decision to give up the game was really tough to make. I loved playing. I played well enough to rate at 4.5 in my 40's and 4.0 throughout my 50's. But the decision was one of risk/reward. If I kept playing the odds were I'd need to replace the other knee and I'd shorten the life of the knee replacement I had. Oh, and then I have this rotator cuff tear.

All of this confirms your thoughts that

I am older than you are.
We have different risk/reward profiles.

What I think you are saying is that, because we have different risk/reward profiles, we may make different 'correct' decisions. At any rate, that's certainly my position and we may agree on this.

In constructing a risk/reward profile, I see three main factors

What are the actual risk/reward values? Perhaps I should add, "...as we can best calculate them with the data available and in the time we have to make a decision." It doesn't make sense to build a Monte Carlo model for every decision.
How does that make you feel? Different people do have different 'comfort' levels when it comes to risk. I believe that most folks see just this factor when they think of a risk profile. They miss the other two factors.
What are the alternatives? Do you have a choice? A 'risky' investment might still be the safest bet you've got.
So your decision to accept a tennis scholarship [or not]; and my decision to shift from tennis to biking, swimming, and Bluegrass music; must be taken in the broader context of our different lives.

Similarly, your decision to go after a SIRI play, and my decision to stay away from that play, could both be 'correct' decisions in the broader context. I didn't mean to imply that I thought you were 'wrong' to go after that play. You see a short term trading opportunity. Go for it.

For my money, I prefer working with covered calls. And, upon reflection, I think this is where you associated me with a 3% return. Actually, I am content with a 3% return — but that's 3% per month. That is 36% per year simple interest and 42.5% per year compounding monthly — on the call premium only...over and above any gain the the PPS of the underlying security.

I'm hoping that you missed the part about 3% being 'per month'. That would explain your apparent disdain for the 3% figure.

Finally, I'm interested in why you feel SIRI is the stronger company. The last time I did DD on these two [which, I admit, wasn't all that recently] XMSR had the larger subscriber base, the Howard Stern deal was looking to be expensive and falling short of expectations, and the car-dealer tie-ins were pretty much even. Have things changed, or did I miss the call in the first place?

"Newtrangler" [kinda like that variation]

[niketennis1]

i'm not good enough to receive a tennis scholarship but i'm a decent player. I'm a 3.5 or 4.0. I can agree with your perspective on SIRI. I'm just trying to make a decent amount on this merger because I think it should get passed. After a merger, I expect $4-5 but i'm really hoping for a $6-8 price range even though i doubt this. I've got a limit order at 8.50 hoping that somehow the stock spikes a lot after merger news even though I doubt SIRI will get anywhere close to 8.50. I bought the stock at 3.60 3 months ago so even if it goes to 4 or 4.50, the profit will not be amazing for holding so long.

[Horsefish]

I would be very surprised if the merger happens while the bush administration is in office. Consider the conservative radio talk show bunch whom are controlled by Rupert Murdock. It's my guess that Mr. Murdock is calling in all of his owed favors in order to prevent this merger. The broadcast radio boys would lose their strangle hold on captive audiences.

[Albert0373]

XM and Sirius extend merger deadline by 2 months

NEW YORK (Reuters) - XM Satellite Radio Holdings Inc (XMSR.O: Quote, Profile, Research) and Sirius Satellite Radio Inc (SIRI.O: Quote, Profile, Research) have extended by two months a deadline to potentially terminate without penalty Sirius's year-old proposed acquisition of its bigger rival.

Under the original terms of their deal, first announced in February 2007, the companies could have walked away after March 1 if they did not receive regulatory approval.

U.S. regulators, including the Federal Communications Commission and Department of Justice, have yet to decide whether to approve the merger. Both companies said this week that they are optimistic both agencies will approve the deal.

The deal's strongest critics, including the traditional radio industry, charge that combining the two U.S. satellite radio companies would be anti-competitive.

XM and Sirius have said that with the bulk of new satellite radio subscription coming along with the purchase of cars, the relatively small satellite radio industry would merely be one entertainment option for consumers already using high-definition radios, iPods, and backseat televisions.

The friendly deal, valued at about $4.6 billion when it was announced, called for XM shareholders to receive 4.6 Sirius shares for each XM share held. It would bring under one roof programming by Howard Stern, Oprah Winfrey, Bob Dylan, Major League Baseball and the National Football league.

Shares of both money-losing companies have slumped since one year ago, with Sirius shares off about 20 percent and XM shares down about 16 percent.

(Reporting by Franklin Paul, editing by Phil Berlowitz)

[niketennis1]

SIRI is really driving me nuts. I could have traded this stock so well by buying it lower instead of at $3.60 (I know its bad to look back at previous trades and double-guess yourself). I really just want it to hit $4 so I can trade on margin because I'll have the amount I need if it hits around $4. I really want to short stocks now because this market is crummy, but will definately improve once the market gets oversold.

[Albert0373]

SIRI is really driving me nuts. I could have traded this stock so well by buying it lower instead of at $3.60 (I know its bad to look back at previous trades and double-guess yourself). I really just want it to hit $4 so I can trade on margin because I'll have the amount I need if it hits around $4. I really want to short stocks now because this market is crummy, but will definately improve once the market gets oversold.


Just stop....you're embarassing yourself.

[yupyup]

I would read up a little more before attempting to short anything, and losing your brokers money. One of the things you're going to have to learn is when to cut your losses. Sitting with a 21% loss in hopes of a 40% turn around to gain a net of 11% probably not one of the wisest things to do. Sometimes have to learn to take the loss and move on. Probably one of the hardest things I have been trying to do, but something that must be learned.

[niketennis1]

yea i'm going to take a 21% lose when i've held this stock for 3 months. No way. I'm in siri for the long haul because I'm confident in the merger getting approved. The stock will go to atleast $4 when the merger is approved so i'm really not worried about waiting.

[Albert0373]

I would read up a little more before attempting to short anything, and losing your brokers money. One of the things you're going to have to learn is when to cut your losses. Sitting with a 21% loss in hopes of a 40% turn around to gain a net of 11% probably not one of the wisest things to do. Sometimes have to learn to take the loss and move on. Probably one of the hardest things I have been trying to do, but something that must be learned.

Wise words. +rep

[yupyup]

One additional note. If you need a 40% gain to have the funds to trade on margin, don't trade on margin.

[flybynight]

Has anyone heard anything new regarding the DOJ approval?

[MrSer]

You are just wasting time and having your funds locked in a crappy stock and even if the merger gets improved its just going to be a bigger company losing money lol.

[flybynight]

MrSer thanks for your contribution to the thread. After the DOJ approval watch for a good rise in the stock price.

[flybynight]

Hope there is good news to come next week. The FCC is reviewing draft decisions and I hope we hear something soon.

Best of luck to everyone.

[Tonkatoy]

Good luck indeed, I'm crossing my fingers, I have Jan 09 calls.

[brotherZ]

I sold my SIRI shares a while ago when it was really beaten down. I chickened out and sold. Maybe I should have held them.

[Hondaboy]

SIRI is getting some awesome P/M today

[barlowmi]

Is this merger ever going to take place. Right when we think its going, it takes anotehr dive. My March calls $3 expired, then after hours went above $3.
Bought more June calls too. Just hoping the FCC approves so they can move forward and we cna all make some $$$