I wont be surprised when AIG gets right up there with GS. Look at the chart, this stock surpassed GOOG for many years above $600!! Too big to fail!! But thats not what I'm basing my play on, just a fact.
Buying some August $60 Calls and will sit on em! GLTA
If you sit on your August calls, won't you lose the warrants?
I think the options will trade with value for the warrants until they are issued - as at any time prior to that time, the options could be exercised and thus obtain the right to the warrants. But "ex-div" the warrants, the current stock price will take a big hit.
I'm long, but struggling with how the warrants will work. Have Jan 2011 and 2012 deep in the money options at this point, so I think they are both trading with the implied value of the warrants. Ie the Jan 2011 will get closed before the warrants are issued, and because the 2012 is deep in the money, it would be rational to exercise them early, as the warrant value is worth more than the time value of the option.
But for out of the money options with ex dates post the expected warrant date (q1 2011), I don't think that logic applies.
Any other thoughts from option traders?
See this from 8-K:
"Issuance to AIG’s Common Shareholders of Warrants to Purchase AIG Common Stock
Shortly after the Closing, AIG will issue to the holders of record of AIG Common Stock immediately prior to the Closing, by means of a dividend, 10-year Warrants to purchase up to 75 million shares of AIG Common Stock in the aggregate at an exercise price of $45.00 per share. None of the Trust, the Treasury Department or the FRBNY will receive Warrants." http://sec.gov/Archives/edgar/data/5272/000095012310111979/y88225e8vk.htm
So after the closing, the common will trade without the value of the warrants, and the holders as of the record date will have one share of common, and half a warrant (one warrant for every two shares of common).
By the same token, options will then have the right to buy a share of common without any warrants.
Yes the warrants are multi-year, but you have to own the shares at the time the warrants are issued to maintain the benefit of the warrants.
So if you do not own shares on the date the warrants are issued, you don't get the warrants.
Right now the shares trade with the warrant value, the same as a stock trades with dividend value until the ex-div date.
On the ex-warrant date, the common share will fall by the value of the warrant, and by the same token, an option will become an option to buy the shares without the warrant. Both common and options will therefore take a big hit.
Going back to $150? Hahahahaha! Thanks for the good laugh. You know anything about the basic underlying fundamentals of their core P&C operations? You know, the operations that need to generate the earnings necessary to justify the pricing levels you suggest. Those same fundamentals which required they add billions to under-reserved reserves thanks to their grossly under-priced P&C business. The problem nobody has their eyes on due to all the other problems they have? Do your due diligence on this dog to see what you have bought into.
Just a bit of friendly advice: If you think that it's in any way, shape, or form meaningful to compare different stocks on the basis of the PPS, stop trading stock until you've learned a lot more about how the stock market works, because you don't even know the bare basics.
The absolute share price has absolutely no significance whatsoever in regard to comparing different stocks.
I knew I'd get a rise or laugh out of some of you but it isnt impossible is it?
Just remember how this stock can pop $10 without a blink of an eye!! I'll still sit on my $60 calls thank you.
I both agree and disagree with you. The concept of comparing AIG with GOOG and the 'over $600' comment is jibberish. The fact is that 'over $600' is artificial and reflective of the the reverse split. In reality, AIG did not trade $600 (as goog has). But we agree the absolute share price is near meaningless in value evaluations. BRKA is easily the highest priced stock, but that doesn't make it the best stock (although IMO it is a good stock).
On the other hand, to say that AIG is going to $150 to hand with GS (an absolute price) does say something. Not because of the absolute price given but because it must be considered relative to current. Thus claiming a $150 price implies a 2.5x increase. Of course even an increase with no time horizon given is of little value. (I.e. who care if AIG goes to $150 by the year 2275).
BTW, i am not commenting on the veracity of the specific comment that AIG is going to $150. That may or may not be true and is its own discusssion.
Actually the OCC can very easily. First it is only the fed shares not getting warrants. When those shares do trade, will be after the warrants are issued (at least that is the plan as announced.) So they will trade ex-warrants. But so will all the other shares. The warrants are only tied to the shares from now (as theoretical warrants) until the warrants are issued. At that point in time the shares (w/o warrants) and the warrants will trade as separate instruments. Since those have not traded, that doesn't cloud the issue. Also remember options are independent from AIG. They are literally created from thin air by a willing writer and willing buyer (that the OCC helps match up.) So all the options right now are priced with these theoretical warrants attached. When the warrants are issued, the stock price will re-price (by the value of the warrants) instantaneously. At that same instant the OCC will adjust the terms of the outstanding options (all of which would have had implied warrants attached). Future options written after that instant will be written sans warrants and for their own terms.
Entire results is that their won't be some people who got warrants and some that did not. Not unless AIG chooses to create two completely separate and permanent classes of stocks. But even were this done, the OCC would have to deteremine to which of these two classes of stock would the outstanding options be tied. They would then make the correct and instantaneous changes to the terms of those options to hold the value constant across that 'instant'
I have been through similar circumstances with options. Depending on lots of factors and terms, it can get very complicated. But once those factors and terms are known, the OCC will figure out the correct adjustments, will announce them (ahead of the warrants issue) and will explain why the particular adjustment is "correct".
Thanks for the extrapolation of the forthcoming events. I will hold my shares, and expect them to be signifigantly more valuable as AIG breaks free of the govt chains. I have felt all along that the Feds want this to be successful, and thus longs will profit