CEPH options way out of the money

On Wednesday, CEPH acquired capped call options from SBC Warburg covering 2.5 million common shares at strike prices of $21.50. The options have a six-month term. The drop places the options $8.50 out of the money. When the option deal with Warburg was announced, the stock was trading at about $19.375.

The downside is that CEPH spent 490,000 common shares to pay for the options in anticipation of participating in upticks in the stock. The options have a cap price of $39.50, putting CEPH's potential gain at $45 million, or $18 per share...