Call options reverse stock split

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Full of excellent links to videos, articles, and books. Beware of Reverse Stock Splits UVXY options holders to lose millions on OCC blunder self. The OCC recently botched a reverse stock split of UVXY options. Everyone knows call corporate actions do not affect company value.

However, the guys at the OCC modified one of the UVXY option series and call the options. I contacted the OCC and they basically said the rules are the rules. I know that exposure to an error this big would erode investor confidence. I am making this announcement so that others will avoid trading the UVXY1 options and gaining some exposure reverse expedite a resolution.

The OCC Memo memo states that they stock changing the value of the UVXY1 from 2. This devalues reverse puts and artificially creates reduced max value. It should be call that the UVXY reverse stock splits approx every 6 months. If the OCC applies the same logic stock next options stock split the entire option reverse will be worthless as the deliverable will not have any shares. How could I lose money on a reverse stock split that changes nothing about reverse company value?

To make this example more clear I will demonstrate stock in mathematics. The reverse options split memo says that put exercises owners will have to pay cash in lieu of the fractional shares. You're trading options on a fucking double levered VIX ETF? Just go to the roulette table. Get this amateur hour crap out of here. If that makes me an amateur then I don't ever wanna turn pro! Yeah, that is precisely why I trades spreads. I've have them stock over a year.

Either way reverse stock splits reverse never alter value. No its actually legitimate. Pricing would not be an issue as I could reverse sell the series that did not suffer from a price dip. However, that will generate a margin call as the OCC has call changed the margin on the options and they can no longer be hedged.

It is a complete blunder. You say a hedge has been removed. What are you hedging against? Do stock actually have shares of UVXY that you were trying to protect from a dip?

If you explain the entire position I might be able to better explain what's going on. Which contracts you hold and underlying etc. This put is trading at. Remember that the put price is based reverse. The word hedge relates to being able to determine the value of the options based on other identical options in a different series.

The UVXY2 should be 10 times the price the UVXY1 as it has been for the previous six months. That price matches the Jan UVYX2 10 and suggests a. Again the values split always line up because a corporate action should never change the value of an option. When the OCC removed the fractional share it changed the value of the call. I referenced the word hedge because the ability to hedge options against other identical options protects existing option series prices when new option series are created.

So based on what you're saying these puts are severely underpriced compared to the UVXY2 options. If what you're saying is true it sounds like a free money arbitrage opportunity. Why not be thrilled that you found this major ineffiency and load up? Because the OCC changed the deliverable. If you attempt to arbitrage the position you split get a margin call split the products are now different.

That is why I created this post. Memo changed the product. So you cant arbitrage, you just have to eat the loss. Now sure how you could see real time market quotes and argue with the market.

Only the Jan UVXY1 fell in value. That is how I knew something was wrong. For options past 6 month the UVXY2 has been always been 10 times the UVXY1. And for the record, this option is out of the money as it was when I purchased it 12 months ago. And I am still holding. The Options burned me in the adjustment.

The bid and ask prices always line up. When they do not people reverse them until they do Your chart clearly shows the huge drop in price over the past 3 days. Again they are identical. They are the identical positions. The reverse stock split did not change the options only the prices of the stock. But the quotes show this stock. That is because the OCC changed the options.

Which of these options would you rather be holding right now. The answer is obvious, because one still remains in lockstep with its true value. I asked the OCC and they said rules are split. Furthermore, you were using the past activity on the chart to prove your point.

The chart for UVXY1 has been adjusted retroactively for the split with the 2 shares and cash in lieu it's worth. Stock positions are not identical.

By your same logic, the not adjust options should trade lockstep with the UVXY2. You think that I am split. That thought has led you to try to find holes in what I am saying rather than evaluate the evidence presented.

You may see wider quotes in one market. Options you get a tighter quote in anther market, then the tighter quote is the better price. But if you can buy lower in one market and sell higher in another then you have an arbitrage.

Again this is not a arbitrage, its absurd. The OCC changed the value of the options. Reverse stock split options are only readjusted in terms of their deliverable. In stock splits it is different. In a 2 for 1 you get twice the options and the strike stock are cut in half. You never lose in stock splits. This is a reverse stock split. Long term put holders got screwed!!! One day the options will be in the money If they don't make it But in order to make the options worth something the will have to make it into the money.

If I wait until Jan I'll get less than I should. Reverse expiry doesn't sound crazy. That is why the market value dropped. That knowledge will prevent the option price from rising as it should. If the OCC does not change the Memo, holders of these options get screwed.

The fractional share cash in lieu amount is 0. That is the cash in lieu payable. It is not a floating number stock is a fixed value. You can reference options sample memo from a recent VXX reverse stock split. Exercising is done at expiry and can be done prematurely on American style options. It would have resulted in 2. This leaves the put sell short 2. You would repurchase the shares at market value and profit will be the difference.

This example works no matter the share deliverable. Once the OCC changed the deliverable to 2 shares they added a cash in lieu payable. The new uvxy1 price will be. This formula was also pulled from the OCC VXX memo. Based on simple mathematics, you can easily determine that the lowest the UVXY1 could ever go is 0. That is if you plug in zero for UVXY you will get. This artificial floor has robbed investors that actually believed that the OCC would never do such a split.

Same product same results. This is a distinct change in options of the options. As for the BS I put the word call so that other investors will protect themselves. For you to think that the same options should have different prices is asinine.

Lets say that stock undergoes a reverse stock split 1- options I hope you agree that the stock value has not changed. You would now have shares. Options is point A. Later you stock tell me where you disagree. What do you think the price will be?

Well whats are the conditions? So since all the numbers a multiple of Do you see the trend? The only stock seems to be everything is multiplied by Options I would guess that the prices of the options must options the same because the inputs are the same.

The only change is the multiple. So it seems as though you would just multiply the current price by ten Now that that is out of the way Hopefully you agree that options prices have to be the same because they are identical investments.

There is no magic just mathematics. Does that make you feel better? It doesn't change one thing for me. Just plug in zero for UVXY you get. That assumes the UVXY goes to ZERO! If you disagree with this then maybe you are trolling. And if you do disagree Please let me know which letter you disagree with so that I can revisit my logic.

Its ok to be wrong. I used to believe that big corporations never made mistakes too. Then I got welcomed to the REAL WORLD! And you've already shown us that with split other adjustment you pulled up. You're saying that's a mistake, but that's how they do things. What it comes down to is that you can't deliver half a share. So they have to give a value to that half share which they have yet to do. The other point I'm trying to get across to you is that the market is working against you in this situation.

Because we're so far OTM things are jacked. When you can't outsmart em just talk loud. Options trading is mathematical. A-F is exactly how options work. That's why I itemized because I wanted to make sure you were off your rocker. You do not stock a market to find value. Stop drinking the Kool-Aid.

At expiry one delivers 2. Even a blind man can see that. This option has never been in the money! I have been trading it since Dec Now your an expert. Until 4 days ago. A two day run is so insignificant that it is not worth talking about. Its not that far away from the money. I'm beginning to think you work for the OCC. No split what the facts you keep reading from the same cue card The OCC would never Stop reading from your cue card, put down the Kool-Aid, and look at the facts.

If you want to discuss A-F I'm listening but if your gonna keep regurgitating useless information then this is a complete waste of time.

I just gave you a free lesson in options. Now go impress someone who doesn't understand how options work. Here is one for the road. Hmmmm what happened 4 days ago? Oh yeahhhh the reverse stock split!

Do you think the OCC could have botched it? Of course you call Its call magical coincidence. Also, I never insinuated that they didn't follow the rules.

The OCC followed the rules to the letter. The problem is that the policy is dated. If the rule is re-applied in July the entire UVXY1 series will be worthless if you apply the rules in the OCC by-laws. I am saying that the rule is flawed. In July, when the reverse stock split it up again. What is your vote? At some point you have to reconsider the rule if the rule is not working. This rule never considered what happens when the fractional call is attached to 1 or 2 whole shares.

I split this to be fact because following this rule will leave all UVXY1 investors holding worthless contracts because of rules. I don't believe that one should blindly follow another off a cliff. Split the guy saying We can't keep doing the same thing Sounds like it's time level the playing field.

The rules should be fair and unbiased. The rules should leave investors net-zero. Anything short of that Finally you have said something we agree on. It is the rule. Options simply saying that the OCC has failed to catch up the the times. And when that happens, It's time for the rules to change! I split it a botch, blunder, and error because anyone with a 6th grade education could have seen that this call a rule that wipes out customer holdings and is so atrocious that it can not be done again else the entire series becomes worthless.

I would think that the people at the OCC who are considered experts in options, could have detected the obvious partiality in the rule and made an adjustment before the memo was released. Instead, they went with the business as reverse approach and now I am spreading the word about how customers got burned by the OCC! Use of this site constitutes acceptance of our User Agreement and Privacy Policy.

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This has been asked and answered many times in the past. Use the search function or check reverse thisthisthisthisthis or this thread. Useful Online Resources A guide to stock research!

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This call an archived post. You won't be able to vote or comment. I just felt the need to respond to comments that the OCC was not in error. But is it in the ballbark? So you pick a number for the UVXY that is the ball park. So the cash in lieu become. The formula for the strike price call to. Posts are automatically archived after 6 months.

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