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Re: SDRL Oct Puts
Its good to know these things BEFORE you execute the trade, no? To answer your question, you sold $1 strike puts for $0.87. If the stock is ABOVE $1 at expiration, the puts expire worthless, you keep the $0.87 (minus transaction fees). If the stock goes to ZERO, you're obligated to accept shares at $1 each, leading you to a max net loss of $0.13/each (again, minus transaction fees). Anything above $0.13 at expiration you'll make some money, just not much. You're basically insuring the counterparty of your transaction against the stock falling below $0.13/share. So yes, $0.13 each is your maximum loss, assuming you disregard both transaction fees and whatever opportunity cost you forgo in maintaining your short put position (realistically that could be zero, only you can say). Even that assumes the SDRL shares go to zero. . .which they won't, since they're now convertible to new SDRL shares which presumably will have SOME value. But you could lose money if the new shares are worth less than $0.13/current share, and I think that's possible. |
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