what happens to the options if a company is acquisitioned or merged? For example: what happens to the Yahoo options if Microsoft buys the company? Thank you!!
This is a good question, and I hope someone can answer it for us. This has happened several times to me. I trade spreads, and on occasion I look at my portfolio and see that a position has changed - sometimes the number of contracts stays the same with different symbols, sometimes the number of contracts changes and has different symbols, and in one case the number of contracts changed with new symbols AND I suddendly had 20 shares of some stock I never heard of. But I never lost any money on these surprises, and none of the characteristics of the positions seem to have changed that I could tell.
Are these debt spreads or credit spreads? Must be debt spreads, no? I can't see a credit spread staying in the profit zone after it's been the target of a takeover bid.
Yeah I trade bull call spreads (debit). Actually I probably could find examples by going through my transactions, but frankly it' notworth the time since it is a rare event. I do remember a couple of occasions I closed out spreads early to avoid this mystery outcome.
there you have all the info you need, from the most reliable source (the OCC itself). It's in chapter 4 http://www.optionseducation.org/classes/syllabus_contract_adjustments.jsp