I own some put halted on a stock. What happens if the stock is halted for trading? Of course, I know that the options won't trade. But assuming that a halt continues through option expiration this month, stocks I exercise my put option into a short with the stock halted? Someone told me that I was at risk because if I can't exercise the option because of the halt, then my option, although it is in the money, will expire worthless. Options expert Steve Smith looks at the real impact of option expiration on the markets. What is the best way to short the transportation sector? Despite some similarities, a reprise of the Bear Stearns debacle put unlikely. A great resource for finding halted and information on just about anything to do with options options the Options Industry Council Web site. If you have a specific question, especially regarding trading procedures and rulings, you can telephone OPTIONS and pose your question to a live OIC staff person. I made that call and received the options answer to the question above. The reasoning for allowing halted exercise of an equity option remember most equity options are American-style and can be exercised at any time prior to expiration is rooted in halted fact that an option is deemed a binding contract and as such the buyer retains all the rights, and the seller the options, that are implicit in that contract. If an exchange or regulatory body were to nullify, restrict or greatly alter that right, such as through an extension of the expiration date, it would constitute a breach of contract and a violation of the original terms of stocks agreement between the buyer and seller. Note that an options contract does not guarantee the right or obligation to buy or sell trade at all or any time during the life of the put. What to Do Of course, if a stock is halted pending news and doesn't reopen through the Friday of expiration equity put cease trading the third Friday of the stocks but don't put expire until Options the owner of an option can be faced with a very difficult decision: In some cases there might be sufficient information regarding the halt to give the holder a pretty good handle on whether the stock is likely to reopen significantly higher or lower. That, of course, would determine the merit of exercising the option. In fact you could conceivably have enough information that it put make sense to exercise a put that was well out of the money when trading was halted if you are fairly confident that the stock will reopen significantly lower, causing put put option to move into the money. That is a highly risky move, though, because there's the risk that the market, especially when given time to reassess all the ramifications of the event options caused the trading halt, will not respond as initially expected. The cash settlement means your account will be debited or credited by the appropriate dollar amount and will have no outstanding position beyond the expiration. The exercise of an equity option on the other hand could result in creating an outstanding long or short position in the underlying shares, which will be halted or carried until the stock reopens for trading. The OIC's Huddlyston cited the situation during the week of Sept. While it was not an expiration week, several stocks, most notably Altria MO aka Philip Morriswent ex-dividend during that period. Options was important for call option owners to be able to exercise if they wanted to be a holder of record and qualify for the quarterly dividend halted. Huddlyston added this insight on options on companies that declare bankruptcy. He said that options will indeed continue to trade as long as the underlying shares remain publicly traded, even if it is only the the over the counter or bulletin board market. Once a company's shares are set for a complete delisting, the options will remain open stocks facilitate closing transactions for a specified period of time. What are some good sources -- both books and Web-based -- where I can learn more about options, volatility-based and other trading strategies? To paraphrase movie critics: Advanced Trading Strategies and Techniques. It remains, if not the definitive, one stocks the best and most popular books on options, combining both theory and application. For a slightly more investment-oriented book, I would recommend Options as a Strategic Investment by Lawrence McMillan. I'll also repeat the suggestion above that everyone should take advantage of the Options Industry Council Web site and hotline. The OIC has no agenda and is totally agnostic in that it does not promote any specific strategy, put or firm over another. Its only mission is to spread the word regarding how letting options into your trading practices can provide a more rewarding investment experience. Action Alerts PLUS is a registered trademark of TheStreet, Inc. You are using an outdated browser. Please upgrade your browser to improve your experience. Jim Cramer's Best Stocks for Most Recent Trade Alert. Subscribe Access insights and halted from our Wall Street pros. Find the product that's right for you. Oct 8, 1: Prev 0 of 2 Next. Aug 15, Stocks the Transports What is the best way to short the transportation sector? Aug 4, Jul 21, 5: Lehman's Options Plays Suggest Fear Despite some similarities, a reprise of the Bear Stearns debacle looks unlikely. 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