# What happens to ETO put options if underlying stock is suspended/delisted?



## cuttlefish (14 April 2008)

What happens to ETO put/call options and exercise etc. if the underlying stock is suspended or delisted? 

In particular if you've got put options over a company and the company gets into trouble and the price plummets but they are then suspended or delisted before the options expire - what happens to the options - are they exercisable still and if so, how?


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## sails (14 April 2008)

Here's how the ASX terminated Pasminco options.  

http://www.asx.com.au/investor/pdf/notices/2001/Clm13301.pdf
http://www.asx.com.au/investor/pdf/notices/2001/Clm16101.pdf
http://www.asx.com.au/investor/pdf/notices/2002/Clm02702.pdf

The fact that the ASX can restrict exercise on puts until it's expiry is a bit of a worry especially if the long put is further out in time.

I sent an email to the ASX a few months ago querying their restriction of exercise in the case of suspension/bankruptcy and how it would affect a put calendar.  If the short put was assigned, one would have to find the cash to pay it out and then potentially wait a few months before being able to cash settle the long put.  The ASX never responded to my email.

Unless the ASX would allow simultaneous closing of the calendar spread where one only loses the debit paid, it could be a horrendously expensive exercise due to the leverage involved and potentially adds risk to the trade.


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## cuttlefish (14 April 2008)

Sails - thanks for the reply and the examples.  I can see the dillemma you raise in relation to calendar spreads - I guess it would seem reasonable to expect them to offer a market in all of them simultaneously once it was decided there was no market on the day of a particular series expiry - it seems unfair to enable someone to exercise against you on expiry when its been determined there is no underlying market but also prevent you being able to exercise the later dated ones due to the same lack of a market.


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