Options and rights issue

NicolasQuant · November 28th, 2009, 1:53 pm

Suppose you are long a Dec put on ING striking at 15. It closed on friday around 9.They have announced a rights issue this week, with subscription options for existing shareholders (6 new for 7 existing)If I exercise now, do I have to deliver only 100 stocks or the subscription options as well?If I exercise after the rights issue, do I have to deliver only the 100 stocks?Thanks a lot!

Alan · November 29th, 2009, 2:59 pm

If it's a US listed option, the CBOE will shortly make a contract adjustment announcement.To anticipate what they will say, you can browse Previous rights distribution announcements Put "rights distribution" in the search box if the link doesn't. Ditto for any kind of corporate action that suggests a contract adjustment ruling is necessary. Presumably any other options exchange will have similar procedures.

NicolasQuant · November 30th, 2009, 4:01 pm

Thanks a lot for this information.