I sold $0.5 Jan 2025 BBBY naked calls. What happens to those naked calls if BBBY files for bankruptcy? Does their value become 0 and my maintenance margin go down or do they stay in my account till expiration, holding on to maintenance margin?
Your bigger concern should be a white knight arriving and BBBY opening at $40 after a giant cash infusion.
What happens to naked calls when BBBY files for bankruptcy? ---> What happens to the naked call trader when the white knight saves BBBY files from bankruptcy? Then the margin requirement will increase by a few thousand times. And the naked trader will be under tremendous stress.
I'm aware of the risk. It's less than .5% of me portfolio. It just feels good to take easy money from the wsb crowd.
Bigger question should be- why would someone trade a product that they don’t have a clue how it works?
the risk could be a few times your portfolio. So far, I did only one naked option trade. I will never ever do it again.
I have been selling naked options since the meme stock mania. I sell far out of money(like 300% out of money) calls. Made 300k last year from selling weekly calls on GME, AMC and BBBY. But this is my first time selling calls in the money calls on a company that is about to go bankrupt. I like to learn by making a trade. I only sold like 10 calls. I usually sell a few hundred calls on GME with strikes that are 200% out of money. I don't think BBBY will be the first company to go bankrupt with stock still trading like it will not. I can then use this experience for other memes when they are about to go bankrupt.
If BBBY stock goes to zero then of course, its calls will go to zero upon expiration but the expiration of your calls is not until Jan. of 2025, TWO years later. Anything can happen within these two years. And as many have already pointed out, the fact that the calls are naked make them extremely risky because with BBBY underlying at such low price and especially if they don't have a lot of debt, the company can become an attractive take-over target. Personally I think BBBY's got a lot of potential to become the go-to online depot for home improvement. It's got a great selection of products that are high quality and well-designed, more selection than any of its competitors and they are very competitively priced. The only reason why it's not doing to well is its brick-and-mortar stores that were greatly impacted by covid and still haven't recovered but if it's willing to get rid of its physical stores and focus more on its e-commerce, the company can do much better. With your calls being naked, once the underlying rises, you can potentially be facing unlimited loss since theoretically there is no upper limit to how much a stock's price can increase. Don't be like Melvin Capital. They can get billion-dollar bailouts when they f*** up, you can't.