Bob.

Would it be correct to say that the only circumstances where you would see a decrease in open interest for call options would be:

1. Someone who had previously sold a call has now bought that same option - essentially bought back their call.

or

2. Someone who has bought a call now executes that call.

I have followed the Jan 14 5's closely since I started buying them in Jan 2012 for ~ 0.20. At that time the underlying stock was trading in the $2 - $3 range, and to me, that premium seemed (and still seems) like peanuts. In Jan 2012, large blocks of the option were showing up on the market.

I've tried to rationalize this action given the small premium and long time frame, and all I can come up with is that if someone had bought the stock at ~ $2.50 and assumed it would appreciate nicely, this move locks in a $5 sale (or 100%) in a 2 year timeframe or less.

Open interest has stayed fairly constant (~ 120,000) since then. Now I'm trying to figure out the recent decrease in open interest - down 7000 the other day; I don't know yet if yesterday's large trading volume decreased the open interest. These calls are now in the money, and thus premium is at a max. But I would think that would just spark trading and not execution. So I don't understand the decreased open interest. I'd appreciate any thoughts you have.

TIA