Interesting ETFC article: http://www.footnoted.org/earnings-quality/etrade-figure-does-not-compute/ Think Stock777 has it right, at this price the stock is a call.
Are you investing in ETFC to make money or not to lose money? 2010 $5 call has a delta of approx 2/3 with a 20 ct spread. Stock must go up 30 cts to break even. Stock has one ct spread. If I were bullish on this POS, with a one cent spread in the stock, I'd trade it silly for the next two years.
And if it gets bot out for $6.20, the $5 call will break even and the stock holder will nearly double. Betting on a $5 call is a long shot. Betting on a $10 buy out is a fool's lottery wish. Could happen but that's a terrible way to deploy money.
this brings up a good question, if you have 2010 $5 call, what happens if etrade gets bought out tomorrow by amtrade for $6. Does that mean now my 2010 $5 call will be worth $1 and lose all time premium? or do they transfer the option over to the amtrade options?
If the company is bought for $6 cash, your options will be worth a bit less than $1, with no time premium. If the company is bought for stock, your options will be to buy howevermuch stock was given for 100 ETFC for $500, and will be priced accordingly. That's all theoretical. No company gets bought out for 100% premium unless it's in settlement of litigation or something. You'd need the stock to hit almost $5 on its own before a takeover for $6 would be realistic.
So if ETFC goes BK what happens to the price of the stock? If they are bought out by TD, wouldn't the stock go up? Thanks for the help!