LEAPS reverse split advice

[dcwriter2]

I have this DUST LEAP Put Jan 2021 now in the money and heading deep into the money and, I presume, based on past performance, a reverse split. Should I hold the new LEAP that comes out of this until expiration? Should I execute it now and roll into the 2022? Or execute the day before the split? What do you guys do?

 

[qwerty11]

The option itself doesn't change in practice (no "new LEAPS comes out") so you can still do with it whatever you wanted before the news.

Why do you think the split affects you in a negative way?

 

[qwerty11]

Maybe people will argue that the "liquidity of the DUSTX options will be lower".

Note that the GDX complex is extremely liquid, so I think you will be able to trade the DUSTX options like when they where DUST (i.e. quotes worse but execution quality the same). And if you want to hold until expiry this does not matter anyhow...

 

[qwerty11]

Should I execute it now and roll into the 2022?

That looks like a bad idea. You already paid a very high premium for the privilege to be short DUST. You're lucky DUST recently imploded so your thesis will probably pay out handsomely in jan21.

If you roll to jan22 you have to pay a considerable extra premium and wait a year longer......