Hi all, In practise, you will lose all debit value when you long calls/puts on a stock which subsequently goes bankrupt. But on the flipside, if you short calls/puts on the same Chpt 11 stock, what would be the implications to your trade position? Are you liable for anything or do you walk away with the full credit?
…with chapter 11, the sock is still trading and you could be obligated to buy the stock, but in either case, if the holder never comes back, you’re off… usually, no need for chap 11 or 7, all you need is the stock being below the strike upon expiration to take your credits. The more interesting question is what if you short the stock and it goes chapter 7, but we did talk about that before on this board.