Another of the residue of the abortion once a part of Tyco.  This pain was a long time in the making.

OF, I'm not an expert at this but I believe if you short the stock in the premarket you can change your position to a short call and maybe save yourself at least some of the pain.

The following excerpt is from the Sheridan Options Mentoring Blog that might be helpful.

Long Call = Long Stock + Long Put     (C = U + P)

Short Call = Short Stock + Short Put     (-C = -U – P)

Long Put = Long Call + Short Stock     (P = C – U)

Short Put = Short Call + Long Stock     (-P = -C + U)

Long Stock = Long Call + Short Put     (U = C – P)

Short Stock = Short Call + Long Put     (-U = -C + P)

Reverse Market Directional Bias quickly

Suppose you are bullish on the market and have a Long Call. You change your mind and decide you should be bearish. If you sold your long call and bought long puts, you would have two commissions and two sets of slippage to deal with. Since we know a Long Put = Long Call + Short Stock, all we have to do is SHORT THE STOCK. This changes your position to a synthetic Long Put with one transaction.

This technique is also VERY useful in very fast market conditions. Option bid/ask spreads can really widen during fast markets so your fills closing your Long Call and buying your Long Put might really put you in a hole starting out. Since stocks are very liquid and have very tight bid/ask spreads normally, shorting the stock is a very useful tool to convert your Long Call position during a fast market.

I hope this helps...

Jim

Golax, with it being known that CIT is (going) in bankruptcy, there will be no stock available to short for OF, if there was the big boys would take it to short.  No, it's a case of closing the barn door after the horse is out for OF.  It may be worth it for OF to cover at the market, if he thinks that he will get a price better that the put exercise value.  If not, he could wait and hope for 'the dead cat bounce'.

Guys, thank you for the nice words and the concern but sp is right - the hourse is out and the door is closed. These synthetic relationships work the best if the legs are executed at the same time. Even if I find some shares to short tomorrow pre-market, they will be pennies

Bankruptcy is the one word that will cause me to sell my shares immediately. I sold my CIT shares months ago at a fairly substantial loss when the stock dropped below $1 and there were rumors of bankruptcy at the time. I have been tempted to jump back in occasionally, but have been able to fight off the desire. I just kept telling myself, if you came across this stock today, with its current financials & knowing that bankruptcy was a possibility (and maybe a probability) sometime in the future would you buy? My answer was always a resounding NO.

I have added "sell on rumors of bankrupty" to my trading rules.

OK, CIT trading resumed and I am out. Maybe everybody is holding for the "dead-cat" bounce sp mentioned above. I did loose some money on it but I knew the risks and I decided to take it. Let's move on ....

The institutional shareholders believe they will receive something during the BK process, 0.26 in this case

Owl said: Well, CIT is down to 0.26 as of this writing. One thing I don't understand: Why isn't it down to 0?

 Remember when GM had already announced bankruptcy and it was at $1?

I still own warrants that they gave me for my worthless stock in the Owens Cornimg bankruptcy. Pennies on the dollar. Maybe I should wallpaper the closet with them.

El Dorado,

Bondholders and Goldman Sachs (through CDS's) get the mine. Current common shareholders get the shaft.