Howdy. Any retail brokers offer CDS? (NYSE:GE, I'm looking in your direction) I'm with IB, and checked with them, but sadly, the answer is no. I doubt that eTrade, Ameritrade, Scottrade, et alia would offer them, but I'd happily be proven wrong. By the way, what happens to a Put option if a company declares Chapter 11? Thanks, Keith
It would have to be exchange-listed for those mentioned to offer it. It's OTC and you'll need to get your ISDA, which you can't.
A put option maximum profit is the strike price if the stock goes to zero minus premium paid. If a company declares Chapter anything the options still trade and have value (puts mostly) and can be traded but perhaps not exercised.
Hmmm.... let's make a deal. I'll sell you a junk bond with a 12% annual coupon for that 10M, with an added clause to pay another 20% when GE goes into bankruptcy. Crap. This is b.s.
Theoretically, its price should go into infinity. But in reality, I think it just won't be available for trading anymore as the company is no longer existing so its options shouldn't be existing either. The counterparty risk would be way too much. I am not exactly sure of the actual process, tbh.
because the price of the underlying, one of the inputs in the pricing equation for a put is 0. If the price of a put is inversely related to the price of the underlying, then if the price of the underlying goes to 0, then the price of the put goes to infinity???!! I said, theoretically.
No....the maximum value of a put is capped at the strike price in all option pricing formulas I have seen...