What happens to naked calls when BBBY files for bankruptcy?

GoogTgt said:
I have been selling naked options since the meme stock mania. I sell far out of money(like 300% out of money) calls. Made 300k last year from selling weekly calls on GME, AMC and BBBY. But this is my first time selling calls in the money calls on a company that is about to go bankrupt. I like to learn by making a trade. I only sold like 10 calls. I usually sell a few hundred calls on GME with strikes that are 200% out of money. I don't think BBBY will be the first company to go bankrupt with stock still trading like it will not. I can then use this experience for other memes when they are about to go bankrupt.
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GME was about to go bankrupt too with its stock trading as low as 90 cents at one point, look at it now and look how high it increased to at one point. Imagine you had ITM call options (which is what you have) when the price of GME was at $400+!! And your option is naked which means you have zero protection when a meteoric price rise happens. Oh well we will see what happens. This will be an interesting lesson for all of us.
 
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TheDawn said:
If BBBY stock goes to zero then of course, its calls will go to zero upon expiration but the expiration of your calls is not until Jan. of 2025, TWO years later. Anything can happen within these two years.
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I can just buy the calls back when calls goes to 0 when BBBY files for bankruptcy right, instead of waiting for 2 years?
 
I am going to hedge the calls by buying a Jan 2025 $15 call which is like $.29 since you guys are strongly suggesting against naked calls. So my loss is capped at $13k which l can live with. If I lose 13k so be it, I'll take my chances.
 
GoogTgt said:
I am going to hedge the calls by buying a Jan 2025 $15 call which is like $.29 since you guys are strongly suggesting against naked calls. So my loss is capped at $13k which l can live with. If I lose 13k so be it, I'll take my chances.
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the thing is with this 2 year hedge you only take home small amount, risk reward ratio doesn’t make sense, return is not great. I closed all bbby and calls positions when the bad news broke early at a lost.
 
GoogTgt said:
I sold $0.5 Jan 2025 BBBY naked calls. What happens to those naked calls if BBBY files for bankruptcy? Does their value become 0 and my maintenance margin go down or do they stay in my account till expiration, holding on to maintenance margin?
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They will probably be exercised within a few days so question is largely irrelevant...
 
qwerty11 said:
They will probably be exercised within a few days so question is largely irrelevant...
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unlikely the stock be delisted anytime soon, hence the option chain will be listed still, even with no value.
 
GoogTgt said:
I can just buy the calls back when calls goes to 0 when BBBY files for bankruptcy right, instead of waiting for 2 years?
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You still didn't understand what everybody is telling you. The issue is not buying the calls back when they fall to 0. If the option's value is already at zero, there is no need anymore to buy it back anymore; you would've earned all of the premiums that you sold the calls for. LOL The issue is what happens when the calls' price goes up to $100+ or $77+ (the highest value that BBBY has ever reached) within this two-year period. Imagine that you would need to buy them back at $100 or at its former peak of $77 or hold them until their expiration risking them going even higher at expiration. You only assume that BBBY will bankrupt soon but what it if gets taken over and gets a second life?
 
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