Currently Twitter is being acquired by Elon Musk. As now the deal is likely to go ahead. What happens to the seller of Call options ( suppose some one has sold call for $60 strike expiring in June 2023), or seller of PUT options ( like someone sold PUT of $30 Strike for expiring in June 2023). Both in the money or out of the money short positions.
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6It's more than "likely to go ahead" -- it closed yesterday.– BarmarOct 28, 2022 at 14:59
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@barmar yes you are right, it is my first time experiencing merger acquisition on a stock that I owned, I still see shares in my brokerage along with short call option. I guess money will hit my brokerage on Saturday (10/29/2022) .– puzzledOct 29, 2022 at 0:54
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not yet ( (10/29/2022) any transaction for sale of twitter in my brokerage account , for position it changed from symbol TWTR to 90184L102 . I now look forward to see it on Monday– puzzledOct 29, 2022 at 16:40
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1 Answer
In a cash buyout like this, options that are out-of-the-money are terminated. Options that are in-the-money are settled for cash, with the option seller paying the option holder the difference between the buyout price and the strike price.
In your example, both of the options would be worthless with an acquisition price of $54.20, but if one were short CALL options at $30, then they would be obligated to pay the option holder $24.20 per share. If one were short a PUT option at $60 they would be required to pay $5.80.
answered Oct 28, 2022 at 3:05
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1The options are settled at the time of the sale, not at their expiry. If it goes public again after the sale, it would be a new listing; the old options will still be gone. Oct 28, 2022 at 19:18
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1@bob Thanks yes it looks like that the out of money Call that I have for 2023 June will settle in 2023 and hence taxed in 2024.– puzzledNov 3, 2022 at 0:36
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1@bob PUT and Call that were out of money both are expired as on Nov 18, 2022 even though they were supposed to be expired in 2023– puzzledDec 4, 2022 at 22:24