Put option question

[value-is-what-you-get]

Does anyone know from experience or otherwise what would happen if one were to sell put options on a company which was subsequently sold.  I expect it would depend on how the sale were paid for etc.

 

For example, if I sell puts on Sandridge and the company is sold before my position expires, I get paid a time premium for time not given, depending of course on what becomes of those options after the sale.

 

 

[Sullivcd]

I believe this issue was discussed on the Dell thread and if my memory serves me correctly the conclusion was they will expire worthless once the deal is consummated. 

[boilermaker75]

Here is what I posted in the DELL thread on this topic,

 

I spoke with an options expert at Schwab. He said it depends. Usually at the next expiration date they will do an early closeout of these out-of-the money LEAPS. Other times they won't and the short out-of-the-money LEAPS position will sit in your account until expiration. I forgot to clarify who decides and why they would not close them out. If they are not closed out they aren't traded so nothing you can do about them in your account till expiration in Jan '15 when they expire. Let's say you have a non-margin account. Then you have to have the cash on hand to secure those LEAPS puts till they expire. He said that is not likely but it could happen.

 

I like to have control over the time frame in these merger and acquisition plays. So I play them by writing puts, but only near expiration puts. I am short Jan 25, 12- and 13-strike puts and Feb 16, 12-strike puts. I will probably write some Feb 1, 13-strike puts near the end of the day tomorrow.