New to trading options. Need advice on Put option now in bankruptcy

[JSOP]

Hi, I hope I'm posting this in the right section. I have recently dove into options trading and have had decent luck so far just placing small trades trying to learn how everything works. So today, I bought a Put Option on WFT and now after-hours they have filed for bankruptcy. I have done some research and found a few discussions on the topic but I'm looking for advice on how exactly I should play this for the most potential profit.

Thank you for any advice
Craig

OMG!!! WFT is bankrupt???!!! It just reported earnings today!!! I was contemplating do an earning play on them. Dang!! I missed big on them. This has been a really weird earnings week.

The best way I find is to sell the option once the market opens but the bid/ask spread will be extremely wide due to the volatility so fill might be an issue. If you really can't sell it, you will have to exercise the put. What you can do is you can buy the shares first, now at near-zero price and just exercise the put to sell the shares assuming trading is not halted. Once market opens, the shares will be dirt cheap and everybody would be happy to dump them to you when you buy and you will just dump them back via exercising. I feel bad for the put sellers. They are going to be majorly screwed.

Meanwhile also keep checking OCC's website. Like many posters said, they would have directives on how the options would be handled.

Congrats on the good investment!

 

[roeco89]

OMG!!! WFT is bankrupt???!!! It just reported earnings today!!! I was contemplating do an earning play on them. Dang!! I missed big on them. This has been a really weird earnings week.

The best way I find is to sell the option once the market opens but the bid/ask spread will be extremely wide due to the volatility so fill might be an issue. If you really can't sell it, you will have to exercise the put. What you can do is you can buy the shares first, now at near-zero price and just exercise the put to sell the shares assuming trading is not halted. Once market opens, the shares will be dirt cheap and everybody would be happy to dump them to you when you buy and you will just dump them back via exercising. I feel bad for the put sellers. They are going to be majorly screwed.

Meanwhile also keep checking OCC's website. Like many posters said, they would have directives on how the options would be handled.

Congrats on the good investment!

Thanks for your input, could you please walk me through my strategy in buying the shares and "exercising" the put? All this terminology is brand new to me. I guess dumb it down for me what I need to do Monday morning. Thanks for all your help. Also how can I calculate what my option will be worth at open on monday morning?

 

[JSOP]

Thanks for your input, could you please walk me through my strategy in buying the shares and "exercising" the put? All this terminology is brand new to me. I guess dumb it down for me what I need to do Monday morning. Thanks for all your help. Also how can I calculate what my option will be worth at open on monday morning?

Try to sell the option first. That's still your best strategy. Only when you REALLY can't sell it then you should consider exercising. If you really want to exercise, just buy the WFT stock first for the quantity of your contracts of options multiplied by 100. And then go to your broker's platform and exercise the option. There should be a command on your broker's platform that allows you to exercise your options. If you are not familiar with your broker's platform, ask your broker. And check with your broker also about this option too as they might have further information on it as well.

 

[roeco89]

Thanks for the quick reply. I use the Robinhood app. I've never exercised an option. Do you know the steps to do that through Robinhood? So I should obviously wait until market open to see what the current price is before selling right? Again, thanks for all your help and I understand I have a lot more to learn. Making this few bucks here could help me out, so I'm making sure I do everything right here.

 

[JSOP]

Thanks for the quick reply. I use the Robinhood app. I've never exercised an option. Do you know the steps to do that through Robinhood? So I should obviously wait until market open to see what the current price is before selling right? Again, thanks for all your help and I understand I have a lot more to learn. Making this few bucks here could help me out, so I'm making sure I do everything right here.

No I don't use Robinhood sorry. That you will have to check with Robinhood, your broker or if someone on ET here knows. They might be able to give you a hand.

 

[Robert Morse]

Hi, I hope I'm posting this in the right section. I have recently dove into options trading and have had decent luck so far just placing small trades trying to learn how everything works. So today, I bought a Put Option on WFT and now after-hours they have filed for bankruptcy. I have done some research and found a few discussions on the topic but I'm looking for advice on how exactly I should play this for the most potential profit.

Thank you for any advice
Craig

Weatherford to file for Chapter 11 bankruptcy. This is a reorganization of the company. Too early to tell if the common will survive.

Here is what will happen.

This is a NYSE listed stock. If the NYSE does not allow the stock to open with a halt, there is no option trading. If the company stock is moved to OTC markets and they are allowed to trade, the common will open and so will the options. If the company halts trading and the stock does not open, the OCC will provide guidance on what the value of the options will be at expiration. That might be a cash settlement or stock settlement.

 

[SteveH]

I've never done it and no one talks about it, even in books, but if I bought puts on a stock and I want to exercise them, why do I have to buy stock before the exercise? Shouldn't I be able to exercise the puts directly and what would happen next is that I will be assigned actual short shares in my account? Then, if I choose, I can hold the short in the stock or buy it back. If the company then goes under, I keep the full amount of the short (100% gain).

All these buy side call/put contracts are linked to actual shares, right? As a holder of either them, I have the right (but not the obligation) to exercise them at anytime I choose, regardless of the correctness as it relates to profitability, and it should have nothing to do with what stock of that same company I happen to have in my account [Yes, I understand that an exercise of puts when you're holding the underlying assigns those shares to someone else].

If any of this is wrong, please correct me. It's the writer of calls and puts who have no control of exercise. The buyer has all of the control, having nothing to do with current ownership of the underlying stock and has paid a premium for that right.

 

[Robert Morse]

I've never done it and no one talks about it, even in books, but if I bought puts on a stock and I want to exercise them, why do I have to buy stock before the exercise?

No one said this. You can exercise your options whenever you want as long as you have the margin fo the stock. If the OCC determines there is no common, like in a full bankruptcy (This happened with GM Options) they get cash settled.

 

[arturo100]

Thanks for all the responses! I purchased the $1 put buy for .62 expiring 5/17.

Thanks for the help guys

Nice play. No bad at all for a beginner!
Without giving away your trade secrets, what kind of analysis let you to decide to short so rightly and so timely WFT?
Congrats again!

 

[roeco89]

Nice play. No bad at all for a beginner!
Without giving away your trade secrets, what kind of analysis let you to decide to short so rightly and so timely WFT?
Congrats again!

Well I'd be lying if I said it wasn't a tad lucky. I played what I thought was a "3bar play" earlier in the day and it was correct. Shot straight down . More luck I think than anything though. Do you know about how much I "should" make off this trade? Any amount is great considering I'm still learning. Also any tips on how I should play this? The more insight the better! Thanks!