what will happen if I buy a call option of one stock, and the next day it is purchased by another company?

Question

eg: I have call option with stricking price at 30 until 2009. now the company is going to be sold for 20 dollors/share. so I end up with nothing?

Answer 1

The option will be adjusted to make the underlying the same thing the owner of 100 shares received in the buyout. If it is a cash buyout at $20 per share, as in your example, your call option would give you the right to pay $3,000 for $2,000 which is obviously not of any value. However, if the acquiring company traded 2.2 shares of their own stock for each share of the acquired company, your option would give you the right to buy 220 shares of the acquiring company's stock for $3,000. The expiration date would not change.

You can look up examples of option contract adjustments for different purposes, including buyouts, at

http://www.cboe.com/tradtool/contracts.aspx

Answer 2

unfortunately unless someone bids higher for them you are f...ed sorry. that sucks.