BBRY Call Options question

I was wondering what happens if you own BBRY call options after the bid is made higher than call price.
Let's say one own $8 call options expiring in November 16th and the bid is made and accepted of $9.50 on Nov 7th when stock price was around 8.20s with each call contract cost of .50 cents. After the bid the SP would shoot up to $9.50sh or around there what happens to call options ? Would they gain just like they would in the normal situation or would they be worthless because price is known and will not move more than $9.50. Would each contract worth $1.20s or more after SP jumps up to $9.50sh. Owing the stock would guarantee the gain but what about call option ?

Yes on nov.17 you will still have the right to purchase the shares of some sucker for $8.00. The clearing house will pay you the difference which would be $1.50. He would get $8.00 for each share he had covered.

The shares won't get delisted that fast so don't worry.

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Originally Posted by BBNation

I was wondering what happens if you own BBRY call options after the bid is made higher than call price.
Let's say one own $8 call options expiring in November 16th and the bid is made and accepted of $9.50 on Nov 7th when stock price was around 8.20s with each call contract cost of .50 cents. After the bid the SP would shoot up to $9.50sh or around there what happens to call options ? Would they gain just like they would in the normal situation or would they be worthless because price is known and will not move more than $9.50. Would each contract worth $1.20s or more after SP jumps up to $9.50sh. Owing the stock would guarantee the gain but what about call option ?

In your example, the $8 Nov 16 calls would have an intrinsic value of the share price minus the strike. Let's say a firm $9.50 deal is announced. Unless the market would be predicting another higher bid, in which case the SP could go higher than the $9.50, the SP would settle somewhere around (e.g.) $9.30. If that happened, the intrinsic value of your calls would be worth $9.30 - $8, i.e. $1.30. Plus, there could still be a tiny of time value left, so the calls could be worth a bit more than the $1.30 (but not by much) in that example.

Why would you think they would become worthless? As the owner of the calls, you have the OPTION (but not the obligation) to purchase the underlying stock at $8. If the stock went to $9.50, how in the world could they be worth less than $1.50? lol.

Let me know if you have any other questions. I'm a financial advisor and have a lot of experience w/ futures, options, and stock trading/investing.

The reason I say that calls value dropped so badly on the day when they announced Pw offer. Someone explained that uncertainty was removed by Pw offer and that is why calls lost the value.

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Originally Posted by BBNation

The reason I say that calls value dropped so badly on the day when they announced Pw offer. Someone explained that uncertainty was removed by Pw offer and that is why calls lost the value.

Posted via CB10

You need google "stock option" and learn it first.

Basically Any option has intrinsic value and time value which is linear to its (or like someone told you "uncertainty".) volatility=uncertainty.

Before PW announce the $9 offer, nobody really knows what BBRY's stock price would be in the future(or should I say nobody really know what the offer price would be, it could be $9, $10, $12, or whatever), and its volatility index was very high (for stocks like BBRY). so its time value was very high too. Time value = delta x VIX x OptionExpireDay (something like that, just for easy to understand).

But once PW announce the $9 offer, the market think there would no other offer,(the market even thinks PW could not fulfill the $9 offer), so it thinks $9 is pretty much a ceiling for BBRY stock now, that is how the uncertainty is gone. All call options with a strike price > 9 pretty much lost most of their values.