glass@houxf.UUCP (K.GLASS) (03/21/84)
I am wondering about the future of Gulf options following a succesful buyout by Socal. (I guess this can be generalized to any options written on a firm that is bought out before the excersize price). If I own July calls for Gulf, and they are bought out by Socal in April, what happens to my options? Are they transferred somehow to Socal options? If so, at what premium and strike price? Are they somehow executed immediately? I would appreciate receiving any informed answers. Thanks Ken Glass houxf!glass
hdt@sunybcs.UUCP (Howard D. Trachtman) (04/03/84)
>I am wondering about the future of Gulf options following a >succesful buyout by Socal. (I guess this can be generalized to any >options written on a firm that is bought out before the excersize >price). > If I own July calls for Gulf, and they are bought out by Socal in >April, what happens to my options? Are they transferred somehow to >Socal options? If so, at what premium and strike price? Are they >somehow executed immediately? I just placed an order to purchase 25 July 80 Gulf Oil call options at 3/16. The market price was 3/16 - 1/4. Before I placed the order, I talked to the broker about what would happen. He said that the options will always be convertible into the physical stock up until the exercise date. The writer of the call must either own the stock, own a call at a lower strike price, or put up exchange minimum for naked call writing. In the latter case, in the event you wish to exercise, the writer must go out into the open market and pay whatever price he has to in order to deliver the stock. In most tender offers a good portion of the stock will not be tendered, especially if the tender price approximates the market price. In the book Anyone Can Make a Million, Morton Schulman has a photocopy of a check for $5000 for 5 shares of stock sold years after a takeover when one company needed to have 100% control. I seem to remember this being a Canadian company, but I can't guarrentee it. US laws are also different. But it probably wouldn't hurt to withhold 1 or 5 shares of Gulf stock. I suspect there is a very good chance my options will expire worthless. However, interest in Gulf is picking up, and she has moved up to 77 7/8 today. If there is a takeover bid at say 85, my profit would be about 7500 on a 600 investment. In any event, the options are good until July, so I doubt they will go much below 3/16. In any event, use your best judgement before jumping into anything with Gulf Oil. My broker also said to avoid doing a spread in the Gulf Oil options as even though there are substantial premiums, many, many people are exercising their in and out(!) of the money options. -- Howard D. Trachtman SUNY/Buffalo {hao, pur-ee, uwvax}!seismo!rochester!rocksvax!sunybcs!hdt (UUCP) hdt.buffalo-cs@csnet-relay (ARPA) US Snail: 2080 Niagara Falls Blvd./Tonawanda, NY 14150-5545