If the government backs up their threat for more accountability...What would happen to stocks like LK and BABA?? What happens to current/future options? Would they get resolved thought the Hong Kong Exchange? Do they go away. Has this happened before with other countries? Thanks for your thoughts...
Options would just become inactive (close only), like always when something material changes (super divvy, delisting, spin-off, etc.)....
Just wondering if you could explain further. I understand the super dividend, delisting and spin-off (GE spun off WABCO)...The option price changed and you had two different options to proceed from (before and after spin-off). Here is my issue. I bought BABA about a year ago ($179 and change). I optioned (leap) Jan 21 $180 (covered call). What happens to my option and stock if in December it gets delisted?? I can see owning the stock...Maybe trade it on another exchange (I'm sure much cost will be involved). But what happens to the person who owns the option? Do they have to exercise (which they should), before delisting? Also, would my broker charge more in fees for holding this stock (since it is not an ADR)? I would think Congress would give a deadline before they made the move. Those Chinese stocks would be all over the place. ADRs would be scrambling to make sense of it all. And would someone buy a leap in one of these companies, with this issue hanging over their head??
It is far less exiting than you think.... I don't know exactly what you mean with "delisted". If you mean delisted from Nasdaq / NYSE: in that case the (US) stock still exist after the delisting event, so nothing changes to the option (except it becomes close only). If you mean the stock is dissolved / cancelled / deleted (whatever you call it), then the underlier changes from stock to payout value. Expiry will be accelerated, but in your example that might be accelerated to jan21, so also no big change in this scenario. Nasty things only happen with penny stocks (think about being short puts and company does a reverse split > 1:100, then suddenly all money gone).
I seem to recall having an option (covered call) about 10-15 years ago. The company got bought out...Little to no regulatory approval. Both boards wanted it. When the buyout came, I got my money as if the stock had been called away. Seems like this would be somewhat the same...
Yeah, that's called accelerated expiration. That of course only happens when buyout is in cash, if partly in shares then the option get a new underlier (partly cash, partly stock of acquirer).
Although the company is delisted and the stocks of that company would not trade on the major stock exchanges but thankfully you will own the same percentage of the shares of the company as you did earlier which you can freely sell. The stress here is regarding finding a willing buyer which makes the process tough.