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Thanks to all who have answered my question.
As I understand this: you purchace some naked puts (not covering up) at
strike 300,
the shares are going to zero, the market maker is obliged to buy it back at
300 ?
How can he do that when the company has gone bankruptcy ?
Normally you would trade all the way down. Let me say you have an old aunt,
who is hiding the put option in a drawer, the stocks have gone to zero. Two
days before the expiration date, she is exercising it. Will she then get
some money (not stocks which are worthless) ?
:-) Marianne
-----Original Message-----
From: A.J. Maas <anthmaas@xxxxxx>
To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
Date: 30. september 1998 17:27
Subject: Re: Bankrupt ?
>At the Amsterdam Exchange there is this "gentleman" agreement
>between the AEX-administration and the floor, wich forces the
>market makers to always make and keep a market in a option-serie.
>In that, it will trade at "Best price" level.
>(You might not get the true 300 but say around 280-295).
>
>There will always either be an implementation of this agreement or
>that another market party, market maker self or the writers, will be
>'intrested' in taking over your position, by buying it from you.
>
>Regards,
>Ton Maas
>Ms-IRB@xxxxxxxxx
>
>
>-----Oorspronkelijk bericht-----
>Van: William F. Nakielski <frt1000@xxxxxxxxxx>
>Aan: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
>Datum: woensdag 30 september 1998 8:52
>Onderwerp: Re: Bankrupt ?
>
>
>>
>>-----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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