I bought 40 contracts of Dec 2024 $3 Puts of LU 5 weeks ago when the stock price was arount 4.7
This week LU plunged to $2. When I was happy to see how much my put worth, I found that there's zero bid.
Is it just a liquidity/demand issue? LU has been up and closed at $2.42 today…. I don't mind exercise my put in Dec but now I worry about more risk i'm facing, and I can't do nothing about it.
Wish it could go to $1 so I can make 8k before commission….. but hey….. why the f there's no bids….. no one gives a shit about this Chinese debt company?
Posted by H0ward-8181
1 Comment
LU has adjusted options because they issued a special dividend:
[https://infomemo.theocc.com/infomemos?number=54664](https://infomemo.theocc.com/infomemos?number=54665)
You have an adjusted option. The multiplier is still 100 and the strike 3, but the deliverable is not 100 shares of LU. It is 100 shares of LU plus $242 cash.
If one were to exercise one of these 3 strike puts, one would receive $300, but what one would have to give up is not 100 shares of LU. It is 100 shares of LU plus $242 cash. With LU at 2.42, 100 shares of LU plus $242 cash is worth (2.42 x 100) + 242 = $484. Therefore you would be giving up $484 of value, and receiving only $300 in return. Therefore your puts are out of the money.
This is common with adjusted options: liquidity dries up, and the OTM strikes will have no bid. There is no solution other than to be aware of upcoming adjustments and close your position before the adjustment takes place.