I have some out of the money options with pretty far off expiry dates (Jan 2013, for example). What happens if the underlying company is acquired before then, while I'm still holding the options? Do they instantly expire worthless? What if if the acquisition price is greater than the strike price?
Let's take a concrete example. Motorola was just acquired by Google, say for $38 per share (I don't know the exact number). Say I had January 2013 call options with a $30 strike price. Obviously right now while Motorola is still trading, I can sell or exercise them, but what about when Motorola stock no longer exists? What if they had a $40 strike price? Would I just be screwed?
Is there any way they could get converted into Google options (I assume not)?