Stocks & Commodities V. 25:2 (38): Explore Your Options by Tom Gentile

Stocks & Commodities V. 25:2 (38): Explore Your Options by Tom Gentile
Item# \V25\C02\026EYO.pdf
Availability: In Stock

Product Description

Stocks & Commodities V. 25:2 (38): Explore Your Options by Tom Gentile

Got a question about options? Tom Gentile is the chief options strategist at Optionetics (, an education and publishing firm dedicated to teaching investors how to minimize their risk while maximizing profits using options. To submit a question, post it to our website at Answers will be posted there, and selected questions will appear in a future issue of S&C.


I own January 2009 puts in a company I feel will be bankrupt in the near future. I have received conflicting responses from traders to this question: What happens to the puts of an underlying company that announces bankruptcy? Is the put writer still obligated to buy shares of the worthless stock at the strike price? Some have said trading in the underlying halts and all the options become worthless. Is that true?

There are no set rules about options and bankruptcy, but often, the puts will still have value and the out-of-the-money calls will expire worthless. To understand why, letís consider what happens in a bankruptcy. If the options are trading, then shares are probably still listed on one of the stock exchanges. However, when a company files for bankruptcy, the exchange might suspend trading and maybe de-list the stock. When US Airways filed for bankruptcy several years ago, the New York Stock Exchange (NYSE) released a memo stating that the NYSE would suspend trading in the stock because the company said it had filed to reorganize.

*Note: $2.95-$5.95 Articles are in PDF format only. No hard copy of the article(s) will be delivered. During checkout, click the "Download Now" button to immediately receive your article(s) purchase. STOCKS & COMMODITIES magazine is delivered via mail. After paying for your subscription at users can view the S&C Digital Edition in the subscriber's section on

Take Control of Your Trading.
Professional Traders' Starter Kit
All these items shown below only $299.99!
  • 5-year subscription to Technical Analysis of STOCKS & COMMODITIES, The Traders' magazine. (Shipping outside the US is extra. Washington state addresses require sales tax based on your locale.)
  • 5 year access to S&C Archive
  • 5 year access to S&C Digital Edition
  • 5-year subscription to Advantage.
  • 5-year subscription to Working Money.
  • Free book selection.
  • Click Here to Order