What happens to options in case of a takeover or a merger?
When there is a takeover, a merger or any other event that affects the shares owned by shareholders, MX will change the deliverable to reflect what shareholders would receive. For example: Stock XYZ gets taken over by company MNO. They announce that shareholders of XYZ will receive 50 shares of MNO for every 100 shares of XYZ they own. If you own 1 XYZ call and if you were to exercise it, you would receive what the holder of 100 shares of XYZ is entitled to receive, i.e. 50 shares of MNO. The seller of the calls will have to deliver 50 shares of MNO. It is to be noted that the seller of the call probably owns 100 shares of XYZ, he will therefore receive 50 shares of MNO in exchange for his shares; he will own the shares that need to be delivered. The holder of an XYZ put will have to deliver 50 shares of MNO per contract held and the seller of an XYZ put will take delivery of 50 shares of MNO.
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- What happens to options in case of a takeover or a merger?
