RE:RE:RE:RE:Just bought calls for 5 dollars in NAK expiring in MarchGenerally speaking
A "Call Option" is the right to BUY a stock. The price mentioned (in your question $3) is what price you would have to pay to BUY that stock. So if you have a $3 "Call Option" on NAK and the stock is valued at $10, you can exercise your option and only have to pay $3 to buy the stock. Alternatively, you could just sell your option directly and an option that is deep in the money like that would be roughly worth the difference between the two (10-3=7)
A "Put Option" is the reverse. A $3 put option gives you the right to "Sell a stock for $3". So if the value of the stock plummetted to $1, you still have the right to sell it for $3 and therefore your option would be worth the approximate difference (3-1=2).
Options contain two elements to their pricing. How far they are "In the Money" or "Out of the Money". An "In the Money" option is the right to buy a stock for below the current market price. So a $3 March option is technically "In the Money" because the current market price is above $3 ($3.08).
The second considerations for options pricing is time and volatility. If a stock is really volatile, options will be pricer because the chance of it moving up (or down) significantly are greater. If the length of time you have the right to exercise your option is longer, the option is pricier.
In the case above. Someone is purchasing a $3 option that is $0.08 "In the Money" for $0.55. The "In the Money Premium" is about $0.08 but the time premium is $0.55-$0.08 = $0.47. So the person selling the option essentially wants a 15% return over the following two months on the stock ($0.47/$3.08 = 15%).
If you buy that option for $0.55 and the stock only goes down and stays below $3 and you wait until March....your option will be worthless because your optional price is above what you can buy it directly on the market. If you buy the option and the stock goes to $5.....your option is valuable because to buy the stock on the market will cost $5, you could buy it for $3.
Make sense?