How is an option contract adjusted for a tender offer or an exchange offer?
According to Interpretation .03 to Article VI, Section 11, of OCC’s By-Laws: “Adjustments will not be made to reflect a tender offer or exchange offer to the holders of the underlying security whether such offer is made by the issuer of the underlying security or by a third person or whether the offer is for cash, securities or other property. This policy will apply without regard to whether the price of the underlying security may be favorably or adversely affected by the offer or whether the offer may be deemed to be “coercive.” Outstanding options ordinarily will be adjusted to reflect a merger, consolidation or similar event that becomes effective following the completion of a tender offer or exchange offer.” Call option holders must exercise their option no later than the expiration date of the tender offer or exchange offer in order to tender shares. In all cases it is the sole responsibility of the person tendering to comply with all the terms and conditions of an offer.
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