General Electric and WabTech



 

Just a quick note for those past Option to Profit subscribers who may still be holding shares of General Electric and also may have written call options on those shares.

Yesterday, GE completed its merger of its GE Transportation services with WabTech (WAB) and you may have noticed those new WabTech shares in your account.

The spin-off was 1 share of WabTech for each 186 shares of GE owned, at a price of $77.20 for each new WabTech share.

That means that unless you owned 18,600 or more shares of GE, you will not have received enough WabTech shares to sell calls upon.

I have decided to liquidate my WabTech shares, as I know nothing about the company and it offers a puny dividend and not much open interest on its monthly option offerings.

For book-keeping purposes I have treated the spin-off as a dividend of $0.415 per GE share and included that in the ROI calculations

In the event that you had sold options contracts, as I had sold January 2020 $13 contracts recently, the new deliverable, if assigned, will be:

1) 100 General Electric Company (GE) Common Shares
2) Cash in lieu of approximately 0.5403 fractional WAB shares

That means that if the GE shares are assigned at $13 dollars, you will have to deliver 100 shares of GE per contract, as well as the cash value of 0.5403 shares of WabTech as of the date of the assignment.

At its current price of $77.20, that would mean a cash payment of $41.71 for each contract assigned.