A company I own options in recently declared Chapter 11 bankruptcy protection. What does that mean for my options?
Following a bankruptcy announcement, trading in the underlying stock might be suspended by the primary exchange that lists the security. If trading in the underlying stock has been halted, trading on the options will be halted as well. However, if the underlying stock begins trading on the OTC Bulletin Board or on the “Pink Sheets,” investors will be able to close out any existing positions, i.e., ‘closing only’ transactions. No new or ‘opening’ trades are permitted. Investors may also exit their position through exercise instructions to their broker resulting in the physical delivery of the bankrupt company’s shares.
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