Lot of confusion about how options will be treated. Does anyone know for sure? I have heard two different scenarios.
1. They will be treated like a reverse split with GGP being the stock, strike place and your number of options will both be changed.
2. The options, if exercised, will give you stock in both companies as if you had exercised your option prior to record date.
Very confusing, especially since some of these options go out more than a year-how would they have any idea how many share of HHC to set aside since most options are not exercised.
This has been addressed no less than a dozen times on this board. Options are a contract for 100 shares of a stock. Changes to the underlying stock change what the contract, and thus option, represents. The easy way to think of it is what would you get if you had 100 shares of the stock. In this case, it means that each option becomes a contract for 100 shares of new GGP and 9 shares of HHC. Yes, you lose the fractional shares, just as you would if you owned only 100 shares of current GGP.
A good example is MDR that split off BWC on 8/2/2010.
There will be two sets of option contracts for GGP. The symbol for current GGP option (including HHC) could be GGP1. The symbol for new GGP option (excluding HHC) will be GGP. The underlying price for GGP1 will be
GGP1 = GGP + 0.09?(HHC)
The strike prices will not be changed.