sold naked puts then company was acquired

Discussion in 'Options' started by runreason, May 10, 2009.

  1. runreason

    runreason

    Hypothetical scenario I'm trying to figure out, any help greatly appreciated:

    What if I sold naked puts on a company and then later (prior to the expiration date of the option) that company gets acquired by another company? The stock against which I wrote the puts is then delisted.

    Am I still obligated to buy that delisted symbol at the strike price as if the company had gone bankrupt? :confused:
     
  2. The acquired company will just trade in a ratio to what the other companys stock price is. So it basically won't effect much unless the other company goes bankrupt.
     
  3. gody3

    gody3

    Your company will be accquired for cash and/or stock of new company. Your puts will be adjusted based om terms of merger/takeover. If your puts finish ITM, you will buy new shares at adjusted terms. If they finish OTM, they will expire.

    If your not familair with adjustments go to CBOE.com web sites and look under TRADING TOOLS then ADJUSTMENTS
     
  4. runreason

    runreason

    excellent, thanks very much for your help!
     
  5. In all due respect for those who tried to answer your question. You better check with your broker. Public discussion forums have their purposes. They also have their limiations.

    Good luck.

    4Q
     
  6. gody3

    gody3

    With all due respect, wow do you have a lot to learn! Brokers are often the worst people to ask a question. Passing a Series 7 exam just means that you are good at multiple choice. It does not guarantee a correct answer until the margin call comes :eek:
     
  7. hrj

    hrj

    People listened to brokers advice and lost many K of $.
     
  8. Gody3, I actually agree with your correction of my posting. Let me say what I was trying to say the first time.

    When there is an acquisition by Company A of the Stock of Company B., I ask the brokerage company IN WRITING, usually via email. If I don't get a response, I request a second time, also in writing.

    If they give me written advice which is wrong and which costs me money, I will take their hiney to Arbitration. If there is a document out there with a broker's erroneous advice, they are very quick to settle.

    Anyway, thanks for jumping all over my first response. It needed to be corrected.
     
  9. Write to the options exchange and ask them.
     
  10. If you must ask someone, write to the OCC, not the exchange:

    options@occ.com

    Mark
     
    #10     May 11, 2009