MO - and spin off rules for options - explained

Written on April 10, 2008 by OptionsRopeaDope

on a whim I called the OIC (888-OPTIONS) and asked how these MO options are treated… and got an answer!  After the spin off, each MO options represents BOTH 100 shares of MO, AND 100 shares of PM. For “strike price” purposes, the options are treated as representing the sum of the prices of PM and MO. Splendid. As of right now, MO is 21.47, and PM is 49.91, giving and underlying of 71.38. Which is a great place to be, considering my dounble calendar is on 70 (puts) and 75 (calls). I currently have a 5% loss on this trade, but if things stay stable that should start to disappear rapidly, especially next week when Theta begins to whither away. I need to verify the liquidity of these, but I’m confident I’m okay and can close them out at the bid when I need to.

Who knew that the OIC took open ended questions like this? Great service.

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    • Category Posted in Real Trades, Calendars, MO

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