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]

Originally Posted by 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

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]

Originally Posted by 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.

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

[wallstreetsedge]

Originally Posted by 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?

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.