PEIX Options - why you should watch them

PEIX Options can be a Good Indicator of Investor Stock Price Sentiment

Even if you know nothing about stock options, you should watch them. They are a very good indicator of where people expect the price to go to and can be a good tool to understand the real sentiment of a stock versus what you may see on the message board from people "pumping" or "bashing" a stock for their own gains. For example, you can see 1843 contracts are still open (open interest) for the $21 option chain. Each contract represents the ability to purchase 100 shares at $21 before August 16th. That's a total of potentially 184,300 shares. The average price people have paid to buy those rights is hard to tell exactly, but the majority look to have been purchased at $0.55 per share. That's roughly $101,000 spent from investors to buy the rights to sell the stock at $21. That means if it never hits $21, there will be a lot of investors who will be out a total of $101k. 

What I really like about Options is it's not opinion with nothing behind it. It's putting your money where your mouth is. 101k is on the line for those people who think the stock price will go above $21 before August 16th. What else I like is you can see the volume on Options. There are some PRETTY BIG investors buying thousands of contracts at 21 at a time. That means there are some "big boys" who see where this stock is going and plan to cash in HUGE. For $21 to make sense, the stock price needs to really be above $21.55 for them to even break even. This is because they paid 55 cents a share just to buy the option, so to make money on them, they need to be able to sell them for more. I like to sell options for at least $4 to $5 more. So this tells us there are a LOT of people who were willing to put there money where there mouth is and say $21/share will hit soon and even higher. So much so, they're staking $101,000. Now that's some useful information to watch. Much better than these message boarder's who post non-sense all day long. (I'm looking at you, Ray on Yahoo's board).

Nick