For anyone who is not familiar with options, there are 2 components that add value to options. One is the amount of intrinsic value -- for instance, if a stock is trading at 7.60 and you have a call option to buy the stock at 7, there is 60 cents of intrinsic value. Then there is the time value. If you have an option that expires in 20 days it will not have much time value in it, but if you have an option for, say, January 2014 there will be a LOT of time value in it. For instance, the ask on the February CLSN 7 call is 2.90, but the ask on the January 2014 is 3.90. (I'm actually a little surprised that the Januray is not a lot more -- but it shows you that there is a very significant premium in the February's.)
Now, when you look at a call that has very little chance of getting up to that value, say a call at 17, the example Situps was using on the other board, there is obviously NO intrinsic value because it is more than 9 points higher than the current stock price. The February 17 call is going for 30 cents, but the ask for the January 2014 17 call is 1.50. That is all premium. It is ALL on the basis of the time value -- how likely is it that CLSN will be at 17 in a few weeks, as opposed to being at 17 in almost a year? Obviously the call further out in time is worth a lot more money because it is a lot more likely that the price will get there in 11 months.
The reason that the price of the February 17 call has dropped is not because ooh oooh ooooh everyone is scared of CLSN. It has dropped because the TiME VALUE always drops precipitously for "front-month" options -- the option with the next expiration date. This is COMPLETELY NORMAL despite what Situps would have you think. And yes, part of the drop is because when he was looking at its value, SEVERAL WEEKS AGO (when there was a lot more time value), the stock was around 9, so it was closer in value to the 17 target.
All of the option pricing in the ridiculous February 17 call is completely normal. Don't believe fear-mongering about this.
A February 17 call option was always a lottery ticket. Frankly the fact that someone wants 30 cents for one now is if anything a BULLISH sign on this.
