What happens to a covered warrant (option) if the underlying share is delisted?

Question

I remember reading somewhere that the issuer can viod the option if calculate a fair market value and pay the option holder.

If void, do they pay money back?

Answer 1

Both warrants and options are contracts between two parties, the writer (seller) and the holder (buyer).

With an exchange traded option (at least in the United States) having the underlying shares delisted has no impact on the rights and obligations associated with that option.

A covered warrant is a sightly different beast since the contract terms are not standardized. The contract terms are specified by the financial institution writing the warrants, so it is possible some covered warrants have a provision dealing with delisting but others would not.

The only way to be certain of the contract terms for a covered warrant is to read the specifications.

My guess is that most do not have any provision for delisting, but I do not have any hard data to support that opinion.