The Options Clearing Corporation has rules that govern options trading and exercise in all phases of trading halts, chapter 11 and bankruptcy proceedings.
Q: I AM LONG AN OPTION WHERE THE UNDERLYING SECURITY HAS HALTED TRADING AND THEREFORE THE OPTION DOES NOT TRADE. IF THE TRADING HALT PERSISTS THROUGH EXPIRATION, CAN I STILL EXIT MY POSITION OR WILL MY OPTION EXPIRE WORTHLESS?
A: When a security is halted for trading at expiration, investors who are long an option usually have the ability
to exercise their option. Exercising an option at a time that the value of the underlying security is unknown may be risky but an unexercised option will expire worthless. In other words, you can get the deliverable (usually shares) but may have no idea what those shares are actually worth until the trading halt has been lifted.
http://www.888options.com/resources/lite...
WHAT HAPPENS IF I OWN A PUT OPTION CONTRACT ON A COMPANY THAT GOES OUT OF BUSINESS WITHOUT WARNING AND THE COMPANY WAS NOT ACQUIRED OR MERGED?
Should a company halt trading for any reason (e.g., it no longer meets exchange listing requirements, halts trading pending news or declares bankruptcy), the options contracts also typically halt trading, as there is no value for the underlying stock on which to base the price of the option. In this situation, however, there are usually no exercise restrictions. For more information, refer to the brochure, “Characteristics and Risks of Standardized Options,” or visit the options contract adjustment notices area of www.888options.com. Under “Trading Desk,” select “Daily Contract Adjustments.” In the search field, type “halt” to see how options contracts that have halted trading are normally handled.
Q: A company I own options in recently declared Chapter 11 bankruptcy protection. What does that mean for my options?
A: Following a bankruptcy announcement, trading in the underlying stock might be suspended by the primary exchange that lists the security. If trading in the underlying stock has been halted, trading on the options will be halted as well. However, if the underlying stock begins trading on the OTC Bulletin Board or on the "Pink Sheets," investors will be able to close out any existing positions, i.e., 'closing only' transactions. No new or 'opening' trades are permitted. Investors may also exit their position through exercise instructions to their broker resulting in the physical delivery of the bankrupt company's shares.
http://www.888options.com/help/faq/split...
2006-12-21 09:07:21
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answer #1
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answered by strath 3
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Bankruptcy may or may not mean that the stock was rendered worthless. For example, K-Mart declared bankruptcy a few years ago. During the bankruptcy process, its stock still had value. As the bankruptcy ended, though, the original stock was declared worthless and the owners of that original stock got nothing; K-Mart issued new stock to get new money. Look up the underlying ticker symbol for the stock for your option...is it valued at a dollar amount? If so, this is the basis for your option. Keep in mind, there is still value but how much value will determine if your option is profitable or not. I hope you get a profit! If not, you can deduct the loss against other profits in the same regular brokerage account (can not be an IRA, 401k etc. to take this offsetting loss) in the same calendar year.
Just curious, what is the company for which you hold an option?
2006-12-21 05:05:16
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answer #2
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answered by Mark G 2
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Stocks of companies that are in bankruptcy may or may not have a positive value. If it has positive value, then it may still trade. Either way, the stock value will either be worth nothing or will drop a lot -- meaning that your put options may be worth quite a bit.
If they are exchange traded options, you will be able to get the current price of the options from you rbroker. It would probably be best to sell the options rather than exercize.
2006-12-21 05:42:53
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answer #3
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answered by Ranto 7
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The put option entitles you to sell the stock at a specified price. Your broker regardless of whether the company went bankrupt or not will be able to acquire the shares for you to sell to the unlucky buyer.
2006-12-21 07:11:25
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answer #4
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answered by Anonymous
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2014-09-24 09:32:30
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answer #5
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answered by Anonymous
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You have purchased an option to sell or put the underlying stock. If the stock ceases trade, you have no market to put. You will have a short-term capital loss on the put along with a loss on the stock, long-term or short-term depending on your holding period.
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2016-04-14 11:20:35
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answer #6
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answered by Anonymous
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the best trading software http://tradingsolution.info
i have attended a lot of seminars, read counless books on forex trading and it all cost me thousands of dollars. the worst thing was i blew up my first account. after that i opened another account and the same thing happened again. i started to wonder why i couldn,t make any money in forex trading. at first i thought i knew everything about trading. finally i found that the main problem i have was i did not have the right mental in trading. as we know that psychology has great impact on our trading result. apart from psychology issue, there is another problem that we have to address. they are money management, market analysis, and entry/exit rules. to me money management is important in trading. i opened another account and start to trade profitably after i learnt from my past mistake. i don't trade emotionally anymore.
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2014-12-18 13:43:41
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answer #7
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answered by BITTO 3
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The answer above is right. If you take all the steps he recommends, you may get enough money to buy a packet of cigarettes. But not very expensive ones. Cheers.
2006-12-21 05:28:59
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answer #8
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answered by Anonymous
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