no_free_lunch Posted April 17, 2014 Share Posted April 17, 2014 Does anyone know what would happen to OTM options on an ETF if it was cancelled? Would you just eat it in that scenario or is the ETF company under an obligation to trade it until the options close out? Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted April 17, 2014 Share Posted April 17, 2014 The OCC would likely make a decision as to how its handled. I would assume that after the ETF holders get a cash payment, the delivery on the options will change to cash instead of shares. Therefore any OTM options would expire worthless??? The ETF company likely has no obligation to the options market. Link to comment Share on other sites More sharing options...
Hielko Posted April 17, 2014 Share Posted April 17, 2014 Yeah, I think this would be handled the same as when for example a company is bought and removed from the market. So if you have an ITM option you get the same payment as shareholders, and if you are OTM your options expire worthless and you lose the time value of your options. Don't think it's likely though that an (active) options market exists for an ETF that has the potential to be cancelled. Link to comment Share on other sites More sharing options...
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