merril options

[ck9]

hi,

does anybody know what happens to all the merril lynch options if the deal is approved?
i guess they will be converted into bac options but i have no idea how that plays out exactly. does anybody know how takeovers are handled in the case of a takeover.
thanks alot!

 

[dagnyt]

Quote from ck9:

hi,

does anybody know what happens to all the merril lynch options if the deal is approved?
i guess they will be converted into bac options but i have no idea how that plays out exactly. does anybody know how takeovers are handled in the case of a takeover.
thanks alot!

The owner of 100 shares of MER gets something from BAC - perhaps cash, stock or both.

Whatever that package is, the call owner has the right to the EXACT SAME package. He gets that package by exercising the option (not now, but at expiration) and paying the strike price.

Many calls will be worthless.

Put owners get the right to SELL that package by paying the strike price.

The options will continue to trade, but the volatility of the options will switch to the volatility of BAC options and not MER options.

Mark