Selling calls on cards

[JohnP0621]

So let me get this straight . The high bidder won this card for $266.00
But this only allows him to buy it at $425.00.
No Thanks.

John P

[D. Bergin]

Originally Posted by JohnP0621

So let me get this straight . The high bidder won this card for $266.00
But this only allows him to buy it at $425.00.
No Thanks.

John P

No according to the pictures the winner has the right to allow him to buy the card for $425 + the $266 bid. So $691.

It's convoluted nonsense.

[conor912]

Originally Posted by D. Bergin

No according to the pictures the winner has the right to allow him to buy the card for $425 + the $266 bid. So $691.

It's convoluted nonsense.

Especially when the card can be readily had for $550. Something doesn’t add up here.

[D. Bergin]

Originally Posted by conor912

Especially when the card can be readily had for $550. Something doesn’t add up here.

I really don't think some those bidders realized what they were bidding on......if they are even real bidders.

[MooseDog]

I know the SEC has been de-nutted for quite some time but I would think this type of thing violates some US Securities laws, not that anyone pays any attention any more...

[iwantitiwinit]

I would agree about the SEC, what transpired is essentially a financial transaction exchanged for a promise to perform, really a non-registered security transaction. Doubt it will fly.

[oldjudge]

The winner is just buying a call, exercisable by 9/14, to buy the card for $425. The strike could have been anywhere, where the higher the strike, the lower the value of the call. Option values are dependent on the strike (how it relates to current value, the time till expiration(more time—more valuable) and the price volatility of the underlying asset. The only issue I see is one of performance. If I ran Ebay I would say that these deals are fine, but the premium is held by eBay until either the option is exercised and the card is delivered or the option expires worthless. That way there is no risk of a seller taking the premium and disappearing.

[White Borders]

Sounds similar to a stock warrant. If the winner doesn't exercise his option to purchase at $425, then he/she is out $266.