PDLI Non Standart Jan 11 Call 7.50 option

Mark D Wolfinger on

Hello, Mark

I look for your help: I`m TIRO in options trade and we are
new US Permanent Residents, so sorry for my English.
I keep 300 chares  of PDLI that I bought in March 2010 for
$7.20 (275 chares) and $6.63 (25 shares).
Today I sold 3 contract of non standart PDLI Jan 11 Call
7.50 options for $6.30 and found the sum of $1,877 on my
account.

Than is very good for me (IMHO) but right now I don`t
understand, what this transaction will be for me: or simply
very good profit, or any problem in future?
Than because I don`t understand what is NON standart PDLI
option means? What a (+) and (-) for me in this deal?
What I could wait in future: I heard tha such options havn`t
exp date and options owner can wait long time to by
underlying stock with profit for him.
Thank you in advance for you explanation or reference to
appropriate site.

Bernard Ackerman, MD (Ret.)

Your English is ok.  Welcome to the USA.  I hope you are happy here.

Why did you sell these options?

I don't know what the deal is (I have not yet done the research), but I guarantee that it is VERY BAD FOR YOU.

When you sell a STANDARD call option,you agree to sell 100 shares of PDLI at the strike price (7.50 in this example).  But, this option is not standard and you must deliver (sell to the call owner) something different.  But you should have done that before you made the trade.
Due to a special dividend, when the call owner exercises, you must sell to that option owner the following:

100 shares of PDLI

$217 cash

For selling both items you receive $750 (the strike price, in cash).
Because you must pay $217 per option, instead of keeping $650, you keep only $533.
Thus you sold stock at $5.33 when it is trading at $6.03

There is nothing you can do.
You sold stock for less that it is worth.
You made a bad trade.

I am very sorry.
Please do not trade non-standard options again. Never.

The information can be found here, but because you are new to options, this will be very confusing:

These options have an expiration date.  Jan 21, 2011.  It does not matter what the option ower does.  You have already sold your stock at the terrible price of $5.33.

It breaks my heart to hear your story.  When something is too good to be true, it is not true.  I hope you learned a lesson from this and are more careful in the future.  I am very unhappy both for you and for me.

I send my best regards,

Mark

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