Put on a chapter 11 BK stock?

[stang3O2]

Does anyone know what happens to puts when the company files chapter 11 BK? I bought some Feb $1 puts on BGP a couple weeks ago because i thought they would go BK, this morning i wake up to see that they did but the stock has been halted, and my broker said they may be worthless now! I dont trade options often but when i saw the BGP stories about possible BK I thought it was a great stock to buy a put on and now that it has happened it sounds like i may be right but having a complete loss at the same time I've talked to 2 brokers who said this is probably going to be worthless but the guy at the Options Clearing House said they were probably wrong and they should not be worthless. What do you think?
thanks

 

[xx765]

The put by definition gives you the right to sell BGP shares for 1 dollar. This doesn`t change no matter what happens to the underlying company. You

I`m guessing the options you bought were physical settled so you need to get hold of BGP shares and exercise the puts on expiry. Probably easier selling the puts for something slightly under 1 dollar since you might not be able to get any BGP share

 

[stang3O2]

Thanks for your reply. The only problem with your senario is the stock is halted and I own 0 shares just the puts. I've never held a put until expiration, what would happen if I didn't own shares but I owned the puts?

 

[xx765]

Best thing to do is to call the exchange and ask.

 

[stang3O2]

Thanks x

 

[stang3O2]

UPDATE- BGP was changed to BGPIQ and now is trading so I can close out of the position

 

[xx765]

brilliant. should be very pround making maximum possible payout on your option.