What am I missing?
by atmotsi | December 16, 2015 12:02 am
Visteon VC sells automotive equipment. Here is Yahoo[1] link to profile if interested http://finance.yahoo.com/q/pr?s=VC+Profile[2]. Recently they sold a chunk of the business for about $3.6bil. Couple of days ago they decided to give a little back to shareholders via a $43.40 special dividend, paid 1/22, ex-date 1/25 and a $500mil stock buyback. (Tentative dates) Total is about $2.25bil. VC is now selling for about $117. I checked and March 90 puts are now about .25-.50. Anybody see the flaw in my logic?o
Endnotes:
- Yahoo: https://www.stockgumshoe.com/tag/yahoo/
- http://finance.yahoo.com/q/pr?s=VC+Profile: http://finance.yahoo.com/q/pr?s=VC+Profile
Source URL: https://www.stockgumshoe.com/2015/12/microblog-what-am-i-missing/
The option strike price will be reset to include the special dividend — generally, any special dividend over a certain amount (I think it might be 10 percent) will cause the options to be reset.
Travis thanks for showing me the error of my ways. Thought it was too simple LOL
In this case the div is about 37% … wonder what happens to an option that would be reset to a negative value.
Denny
Usually the terms of the contract would change — so instead of the deliverable being 100 shares of stock, it would be 100 shares of stock plus $3,700 or whatever the special cash dividend paid to those shares was. Options are generally adjusted for splits and spinoffs, too, sometimes the math gets a little messy but the CBOE will publish specifics for how the contract is adjusted.
thanks again … I’ll get off my butt and do a little more research on this and talk to someone at IB to see if they can cast a little more light on the situation.
Denny