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-----Original Message-----
From: Marianne Seehusen Ditz <marianse@xxxxxxxx>
To: MetaStock <metastock@xxxxxxxxxxxxx>
Date: Tuesday, September 29, 1998 04:50 AM
Subject: Bankrupt ?
>All :-)
>Just a question. If a Blue Chip is worth $300, and you expect it to go
down,
>you buy puts. In case the company went to zero, who is then going to pay
you
>the money you can claim ?
>
>Any answers will be appreciated, thanks.
>
>:-) Marianne
>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++
I'd like to add a little to the discussion.
So someone buys the put when the company is at 300. Okay.
The company then goes to Zero.
That someone's got a really high priced put. Very profitable...or is it.
You could say sell that put and take the profit, but even before the stock
hits bottom you'll have an extreme in the money option with very little
liquidity. Seems like you might have a hard time getting rid of it.
Okay, so thats out. So exercise is the next strategy. I think I'm right
here, but let me know if I'm wrong. The put seller is charged with buying
the stock back from me at 300, right? But if the stock is at zero, or in
bankruptcy, or trading halted permanently, then how do I get the stock to
sell him. If the stock were freely trading say at 10, then a trade could be
made...here's your $10 stock I'm selling to you for $300. But for these
purposes we can't get any stock for the putseller to buy. Follow me?
So it sounds to me like we have some worthless puts.
Or am I all wet?
Thanks for the discussion.
Bill Nakielski
Milwaukee, Wisconsin USA
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