Options on Enron
- Thread starter Wet
- Start date
If the acquiring company paid cash, then your calls would have a new expiration date effective the same ex date as the shares (unless they expired earlier, of course). This means if you have long-term options that expire later than the ex date you're screwed the time premium you paid. If you were short, then life is good.
If the acquisition is a stock swap/merger, then stock is exchanged for shares in the new company at a certain %. Your calls are adjusted to correspond to a certain number of shares of the new company with the price set to give you the same benefit.
The stock swap/merger occurs much more often than cash buyout, especially for public companies. Generally speaking it's better for shareholders, and definitely better for executives who have have long-term stock options themselves.
If the acquisition is a stock swap/merger, then stock is exchanged for shares in the new company at a certain %. Your calls are adjusted to correspond to a certain number of shares of the new company with the price set to give you the same benefit.
The stock swap/merger occurs much more often than cash buyout, especially for public companies. Generally speaking it's better for shareholders, and definitely better for executives who have have long-term stock options themselves.
