It all started with me boasting that I’ve found the sure thing in the securities market. I thought GM put options should all be trading at strike value, as the company was heading towards zero. Little did I know there were quite a lot of “investor stupidity” built into the stock price.
Assuming perfect information and a perfectly efficient market, everything would have worked out properly. In the end, I had to sell the option position on the last day, since my brokerage would not allow a negative position in MTLQQ to be created. Even though the party that wrote the option “contract” obviously should have been liable for the stock.
So I ended up with a $500 loss. Lesson learned. No matter what the fundementalists and the chartists say, look out for idiots, or biliiant people playing the “greater fool” game.
Now back to regular blogging, enough with this horrible stock and options.
Last Friday, trading on GMGMQ was halted unexpectedly. Despite various websites stating FINRA was behind the trading halt, there was surprisingly no official announcement from FINRA.
Well the silence is over, and yesterday night FINRA announced that the stock formerly know as GMGMQ (itself formerly known as General Motors), will start trading again on July 15th under the ticker symbol MTLQQ. The name change and the new symbol will hopefully prevent people from accidentally buying thinking this is the new Government owned GM. (again, no such publicly traded shares exist)
What does this mean for me, a put owner? My put is finally in the money, and if the stock continues its decline, I can exercise and make a nice small profit. Will market manipulation kick in again and give MTLQQ another dead cat bounce? Only time will tell.
If you’re long MTLQQ, keep in mind that management has stated on their website that they expect no value for common share holders. Personally I’d get out while I can.
Since purchasing GM put options about a month ago, I’ve been following the GM bankruptcy closely, perhaps a bit too closely. The original plan of buying puts, waiting for the stock to hit $0, then exercising seemed like such a fool-proof plan to start, until the fools started boosting up the stock price. Now that expiration is just 3 days away, here is what I know, and what I plan to do. Fellow put owners take note:
1. Since GMGMQ trading is halted, and the “last trade” was $1.15, the put options are in fact out of the money, and will expire worthless if you just sit and wait it out. At least that’s what’s expected to happen according to the OCC. There is always a chance that the OCC will issue a memo citing special circumstances due to trading halt of the underlying symbol, but I think that’s wishful thinking.
2. Selling the option is not possible, since it’s also not being traded.
3. Pray that the stock starts trading again to bring the stock under $1? It’s been 2 days since the halt, and FINRA hasn’t officially said anything. I really wouldn’t count on the stock trading again before Friday.
So my solution?
Exercise the put, out of the money. So you create a short position in your account, take the cash, and wait for the stock to start trading again so you can cover. This not only removes the “ticking time bomb” that is the option, when GMGMQ opens again with the new symbol, it’s bound to crash towards $0. Or you can wait it out for the courts to cancel the stock. However if you do, calculate margin interest wisely.
Keep in mind you need margin trading to exercise into a short position.
I’ll post again as the day draws near, but so far, that’s the plan? Chime in 
