I was looking to buy jan11 puts on AIG and I noticed that some contracts were only good for 5 shares because of the 1:20 reverse split.. But why do those contracts have such a HIGH bid and ask price if they only control 5 shares, shouldn't they be lower than the normal contracts? example: 2.50 strike price jan 11 ............................Bid Ask 100 share contract 0.19 0.24 5 share contract 1.24 1.37 Maybe the 1.24 is the price of the whole contract and not per share. So the per share on the 5 share contract would be 0.248 bid for example. That is still high though.
The only thing that I can tell you for sure is that the adjusted contracts are for 5 shares But if you take the premium for the adj contract, divide by 5 and subtract it from the strike, it gives you a comparative price as the new standard contracts, give or take a few cents So in your example, if assigned, you'd buy shares at 2.31 and 2.25, respectively. I think that's how it works but your best bet is to check it out at the CBOE.com or OCC web sites.
Perhaps because they are in the money. AIG = $36.00 post reverse split; therefore, AIG = $1.80 pre-reverse split.
the multiplier does not change, just the deliverable does. So if you buy those puts and exercise you receive $250 but only deliver out 5 shares. So those puts have an effective strike price of $50. Look at the Jan 2011 puts with regular 100 share deliverable and compare those with 20 of these non-standard deliverables of 5 shares. Jan 2011 regular deliverable 24.75/25.85 (b/a) Jan 2011 non-standards 1.20/1.32 x 20 = 24/26.40 from what I could find for Fridays prices...