from the above link!^^^ What Happens To Put Options During Bankruptcy? If you own put options on stocks of a company that has just declared or filed for bankruptcy, you are in for a huge reward. The delivery and settlement of every stock option is guaranteed by the OCC, Options Clearing Corporation, in the US Market. Whoever sold you that right to sell shares of that company at that higher price is obliged to fulfill that obligation, so your profit is guaranteed. The only question is, what happens when that company files for bankruptcy and trading in its stocks and options are suspended? When that happens, trading of that company's stocks and options moves to the Over The Counter (OTC) market or what is known as "Pink Sheet" market where you are able to either sell those put options for a profit or exercise the options and sell the stocks for the same profit. Since it is the company that is going illquid and insolvent and not the person or institution who sold you those put options, you are guaranteed your profit and delivery.
I guess I should have gone with my gut instead of overthinking it... Congratulations to the original poster... nice trade
In addition to my short calls position (which I am not worried about), I am long puts. Does anyone know if / when WM will be trading on the pink sheets?
It is trading already as WAHCU, sometimes a broker may take a day or two to list it in their system. IB had a delay when IMB went OTC/pink.
that's what i wanted to know, when they will be relisted so i can close out my positions to get my cash for the weekend play. But looks like it's at the discretion of the brokerage, there is no set rules for the timeframe i guess. The question wasnt if they will be worthless or not, that's a given. thanks
http://traderupdates.nyse.com/2008/09/washington_mutual_update.html NYSE Trader Updates Washington Mutual Update 26 Sep 2008 Important update regarding NYSE trading in Washington Mutual Inc. (WM) and Washington Mutual Preferred K (WM PRK) today, Friday, 26 September 08. Consistent with Reg NMS, NYSE will open WM and WM PRK for a single transaction, then immediately place it in an Operational Trading Halt under the NYSE Sub-penny Pricing rule. Firms should cancel any orders in WM and WM PRK that are not executed in the Opening transaction. After the close of business today, NYSE will cancel any unexecuted orders in WM and WM PRK. Beginning Monday, 29 September 08, trading in WM and WM PRK will continue at NYSE Arca and other markets. Orders routed to the NYSE will be routed to NYSE Arca, with NYSE Arca pricing applied. WM and WM PRK continue to be listed on the NYSE.