Non-standard options question

If a company performs a stock split all options are invalidated. Why do you think no firms trade options?

but seriously

So you bought a put at 6 -> 60 due to a 10:1 reverse split - wouldn't it be in the money if it is below 60? and you purchased the stock above 60?

What am I missing? I don't know much about options

If I am not mistaken, OCC decides how things like splits are handled. In theory, every case could be different, depending on the circumstances. OCC publishes a memo where they tell you what happens.

From what I have been able to see, normally they would apply the multiplier to produce the underlying price for the new, after-split ticker.

Not sure about the US, but in Europe on corporate actions like a stock split/reverse split the strike and mutliplier are adjusted.

Example: http://www.theocc.com/webapps/infomemos?number=25968&date=200906

Martinghoul

If I am not mistaken, OCC decides how things like splits are handled. In theory, every case could be different, depending on the circumstances. OCC publishes a memo where they tell you what happens.

From what I have been able to see, normally they would apply the multiplier to produce the underlying price for the new, after-split ticker.

Thanks. I will check into the OCC to find discussion.

kingoftheotherroad

If a company performs a stock split all options are invalidated. Why do you think no firms trade options?

but seriously

So you bought a put at 6 -> 60 due to a 10:1 reverse split - wouldn't it be in the money if it is below 60? and you purchased the stock above 60?

What am I missing? I don't know much about options

Then why did you chime in with gibberish?

kingoftheotherroad

The better question is, why not?

I guess some people enjoy looking foolish.

peinvestor2012

If I chose to hold a NS option to expiration, would it execute in the following scenario?

I buy puts at $6/sh strike. Reverse split is made 10:1 to $60/sh. Is the option considered "in-the-money" still if the new price is in the $30s?

Each situation is unique as these are non-standard options. As indicated above, check with the OCC.

Generally speaking your old option is replaced with a new option (new ticker, etc) such that the new terms that represent the same economics as before the CAX. In your case, yes you'd be ITM.

Thanks HF guys. I just checked the OCC and I believe I should be good b/c the new option (ABC1) is now .10 (ABC). So if the stock is at $35, it's simply $3.50 or higher and I'm in the money for puts, right?

peinvestor2012

Thanks HF guys. I just checked the OCC and I believe I should be good b/c the new option (ABC1) is now .10 (ABC). So if the stock is at $35, it's simply $3.50 or higher and I'm in the money for puts, right?

The puts are ITM while spot $60.

Martinghoul

Oh oh oh, pls don't think me rude, but I have to ask (you don't have to answer)... This isn't the National Bank of Greece we're talking about here, is it?

No, good guess though. That was a candidate of mine for a while, but I never pulled the trigger on it.

Anyone have some insight on the value of the options if they are ITM, but non-standard? As I mentioned, I'm easily in the money right now, but the value of the standard option ($60 strike) is far greater than my $6 NS option's value, at least according to how it is being traded.

Should I just hold and execute?

bump

V hard to tell w/o more specific info...