Hello, I own long term options on a 3x etf. With the new possible regulations regarding leveraged funds, I wanted to know what happens to options if the 3x etfs close? Do option holders just lose all of their investment if the options are out of the money? Thanks
I am guessing based on the typical news event for any underlying. If a date in the future is announced, you will see an acceleration in option decay. If the closing is a announced on the same day the ETF is closed, then volatility will crash making the OTM effectively worthless.
Also, theocc.com publishes a document called an "infomemo" whenever a major corporate action occurs, which describes what happens to the option, at least from a contract perspective.
In general, if the equity is not trading, the options don't open. The OCC would send out a bulletin with regard to the settlement procedure. Are you really expecting them to just stop trading?