Yes, I got that BBBY is going to $100. If that does happen, I will only loose 100k as I only sold 10 calls. That is fine with me as made much bigger profits last year and 100k is small fraction of my portfolio. Infact I am hoping that BBBY does soar above $100 so it can issue stock and save 1000s of jobs and I can sell naked calls with a strike of $1000 when it goes above $100. It is just that I never held an option for a company that went bankrupt, so I was curious.
What happens to naked calls when BBBY files for bankruptcy?
- Thread starter GoogTgt
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It's not that BBBY is going to $100; it has the possibility of going to $100 and that's a scenario that you have to take into account when you do naked options. But anyway I see you are going to hedge by buying some calls so you are covered to some extent.
A company that's going bankrupt just means its underlying may have a higher probability of going to zero but doesn't mean it will, otherwise it's just like any other company.
I was on the other side of a similar situation. I had a leap (covered call) from some oil exploration company)...It had gone bankrupt (US). I was trying to unwind the position for tax purposes. I called the broker (either Schwab or Fidelity). They said the company was still trading in other countries. I think I cleared it through Venezuela (when it was a real country)...
Come to think of it, I think it was in my brother's estate (it may have been a put) and I was the executor. I had to clear it to move forward...
Come to think of it, I think it was in my brother's estate (it may have been a put) and I was the executor. I had to clear it to move forward...
His stories don't seem credible to me. I have my doubts a guy with such limited knowledge of options has 300K to trade never mind a 300K profit selling out of money calls last year. I've noted the open interest is 3 but he claimed to have sold 10. So I guess they got exercised ?
bankruptcy’s are tricky because stocks don’t just quickly go to zero. like a villain in a bad horror movie, they just don’t die.
your biggest risk in this bbby trade is a short squeeze which causes the borrow to squeeze and then you get bought in and there’s nothing you can do about it. This can happen absent of a meme stock style event but in bbby that risk is higher than a typical bankruptcy.
I’m impressed that you made so much trading tinies in meme stocks but I personally think you are insane. The cost of capital and the risk of an irrational something can be very humbling.
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90% sure the options already got exercised yesterday and the TS doesn't respond because he doesn't want to admit he was wrong / didn't understand / question was irrelevant...
Edit: I now see your later sentences, in that case change my 90% to 100%...
BBBY isn’t going to $100, it barely made it to $5 on a meme squeeze, and they’re already in an involuntary default months ahead of schedule. Read the early Q3 Pr and you’ll see the management begging for their jobs to the creditors. This looks like a liquidation to me, not worth saving the business even without the debt/interest overhang.
if the common gets wiped out in bankruptcy, once the plan is effective the options will adjust to zero deliverable and accelerate to the next expiry.
if the common gets wiped out in bankruptcy, once the plan is effective the options will adjust to zero deliverable and accelerate to the next expiry.
OK best of luck to you
Ah-Oh.