Steven Smith

If You're Caught Holding Halted Options

 

Knowledge Pays Dividends

Dividends offer another example of why it makes sense for option owners to retain exercise rights on halted stocks. The OIC's Huddlyston cited the situation during the week of Sept. 11, 2001, in which the entire equities market remained closed for four days. While it was not an expiration week, several stocks, most notably Altria(MO) (aka Philip Morris), went ex-dividend during that period. It was important for call option owners to be able to exercise if they wanted to be a holder of record and qualify for the quarterly dividend payment.

Huddlyston added this insight on options on companies that declare bankruptcy. He said that options will indeed continue to trade as long as the underlying shares remain publicly traded, even if it is only the the over the counter or bulletin board market. Once a company's shares are set for a complete delisting, the options will remain open to facilitate closing transactions for a specified period of time.

What are some good sources -- both books and Web-based -- where I can learn more about delta-neutral, volatility-based and other trading strategies?

To paraphrase movie critics: If you were to read just one options book this year, you can't go wrong with Sheldon Natenberg's Option Volatility & Pricing: Advanced Trading Strategies and Techniques. It remains, if not the definitive, one of the best and most popular books on options, combining both theory and application.

For a slightly more investment-oriented book, I would recommend Options as a Strategic Investment by Lawrence McMillan.

I'll also repeat the suggestion above that everyone should take advantage of the Options Industry Council Web site and hotline. The OIC has no agenda and is totally agnostic in that it does not promote any specific strategy, exchange or firm over another. Its only mission is to spread the word regarding how letting options into your trading practices can provide a more rewarding investment experience.

>To order reprints of this article, click here: Reprints

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon purchases by customers directed there from TheStreet.com.

Steven Smith writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He was a seatholding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) from May 1989 to August 1995. During that six-year period, he traded multiple markets for his own personal account and acted as an executing broker for third-party accounts. He invites you to send your feedback to steve.smith@thestreet.com.

TheStreet Premium Services

Jim Cramer
Jim Cramer's Action Alerts PLUS:
Trade right alongside a Wall Street pro — enjoy access to his Charitable Trust portfolio and be sent trade alerts BEFORE he makes a move. Learn More
OptionsProfits
OptionsProfits:
Get 50+ trade ideas a week from the industry's top options experts. Plus — exclusive commentary on market trends and essential trading tools. Learn More
Real Money
Real Money:
Our team of professional Wall Street Pros — including Jim Cramer, Doug Kass, and Nicholas Vardy — delivers intelligent analysis, timely trade ideas, and colorful commentary. Learn More
Stocks Under $10
Stocks Under $10:
Break into the market with small- and mid-cap stocks... all $10 or less! David Peltier tells you exactly which low-priced stocks he's buying and selling. Learn More
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
blog comments powered by Disqus
Dow Jones S&P 500 NASDAQ 10-Year Note
12,419.86 1,313.32 2,837.36 16.25
Oil *
103.00
DOWN
160.83
DOWN
19.10
DOWN
33.63
DOWN
1.06
10 Yr
1.62%
SPDR Gold
151.91
-1.28%
-1.43%
-1.17%
-6.12%
Data delayed 20 minutes

Top Stories and Tools

Articles From

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

We respect your privacy.
Podcasts

Connect with TheStreet