What is a non-standard deliverable?
In one line: A non-standard deliverable is what an adjusted option contract delivers after a corporate action, when it is no longer simply 100 shares of one stock.
How it works
A normal stock option delivers 100 shares of one stock. That's the standard deliverable.
Some company events change that. A reverse split, a merger paid in cash and stock, or a Spin-off can't be squeezed into "100 shares" anymore. So the OCC (the Options Clearing Corporation) adjusts the contract. The option now delivers a new package. That package is the non-standard deliverable.
It can look like this:
- 10 shares after a 1-for-10 reverse split.
- 50 shares of the buyer plus $1,000 cash after a cash-and-stock merger.
- 100 old shares plus 25 shares of a spun-off company.
A few things usually stay the same. The strike price doesn't change. Premiums are still quoted per share and multiplied by 100. What changes is what you get for that strike. The symbol often gets a number added, like XYZ1. That number is your warning sign.
The OCC posts an information memo for each adjustment. It lists the exact package. Search the stock's name on the OCC's website. More events are covered in our corporate actions guide.
An example (hypothetical)
XYZ merges into ABC (an illustration, not a trade idea). Each XYZ share becomes 0.5 ABC shares plus $10 cash. So the adjusted contract, XYZ1, now delivers 50 ABC shares + $1,000.
You had sold an XYZ1 $40 put for $1.00, so $100. If you're assigned, you pay $4,000 and get the package. What is the package worth? It depends on ABC.
| ABC price | Package worth (50 × ABC + $1,000) | Pay $4,000, result | With the $100 premium |
|---|---|---|---|
| $70 | $4,500 | Not assigned, put is out of the money | +$100 |
| $60 | $4,000 | Break-even on the package | +$100 |
| $50 | $3,500 | −$500 | −$400 |
The math is the whole job. Value the package first. Then compare it with the strike times 100. The strike alone tells you nothing.
Why it matters for sellers
- "In the money" can fool you. A strike next to the old stock's last price means nothing now. Only the package's value counts.
- Covering a call gets harder. To cover an adjusted call, you need the whole package, not 100 shares of something.
- Trading often thins out. Adjusted contracts usually get few new buyers. Exchanges list fresh standard contracts instead, and spreads on the old ones can widen. Some are put on closing-only status. See Closing-only options.
In the wheel strategy, you want 100 shares of a stock you'd own. A package of mixed shares and cash is a different trade. Most sellers close it and start fresh on a standard contract. See adjusted options explained for more.
Questions
How do I know if my option has a non-standard deliverable?
Look for a number at the end of the symbol, like XYZ1. Then check your broker's contract details or the OCC memo for the exact package.
Does my strike price change after an adjustment?
Usually not in a merger or a reverse split. What changes is what you get for it. Some events, like a large special dividend, can lower the strike instead.
Can I still sell new options on an adjusted contract?
Sometimes, but trading is often thin, and some get restricted to closing trades only. A fresh standard contract is usually easier to trade.
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