Put options on halted stocks

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Full of excellent links to videos, articles, and books. What happens when a stock is in trading halt, and you own in-the-money put options but no stock?

I searched the internet but couldn't find a straight answer. You still have the right to exercise your option, but you have no stock to exercise with, and can't buy any on the market because it no longer trades. And since option trading also halts when the underlying stock trading halts, you have no way to sell your option on the market either.

So, you'll have to call your broker and hope they can find another customer who owns some actual stock, and do a private transaction before the option expires, where you either buy the stock from that customer at inflated price, or sell your options to him at below intrinsic value.

You have the option to exercise regardless. You'll just be short shares and have no idea where the thing will open. Your risk manager will probably have a heart attack and you should be close behind It can be a really tough call, what happens if the company turns out to be fine and you end up being on the wrong end of a short squeeze on the reopen.

When you sell short to exercise the option, it's still subject to the 'locate' rule, right?

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Now to take this one step further. If you sold short a stock, and then it gets delisted, are you in theory still responsible for repaying the shares?

Is it possible that a few years later, someone take over the delisted company, clean it up and take it public again with previous shares still valid and you still have the pay them back? For the halted section: I'm not sure of the exact mechanics, but there are a ton of exceptions to the locate rule. If you're retail talk to your broker about it my understanding is that certain brokers like TDAmeritrade will allow you to exercise and others like IB will not , if you're institutional talk to your back office.

Question on Options Expiration and Trading Halt: HAR | Elite Trader

Yup, and that's one of the reasons why you will still see bids for companies that have filed for bankruptcy shorts closing out risk. You can still trade the delisted stock OTC to close out the position of course.

If You're Caught Holding Halted Options - TheStreet

This is a relatively small risk for any sort of delisting. Every once in a while in bankruptcies equity holders are not completely wiped out, which can be quite fun.

This happened in but I'm blanking on the stock few guys at my firm had positions on in the underlying but I did not.

They were long options that could potentially go ITM but they had no idea when the stock would re-open or where so they just went through the expiration date and didn't exercise them Use of this site constitutes acceptance of our User Agreement and Privacy Policy. By signing up, you agree to our Terms and that you have read our Privacy Policy and Content Policy.

What happens to the value of Put Options if the underlying stock goes bankrupt? - stocks puts leaps | Ask MetaFilter

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