Subject: Re: OT short TSLA, long BABA
What happens to your call options when BABA breaks up in six companies?
Forget the strategy (which I think is nuts), curious about the mechanics.

Normally a split-up is not an issue - your options automatically get replaced with options in each new entity, with strange strike prices.
For the rounding error, pieces smaller than a contract are generally cash settled on the breakup date.

That presupposes that the new entities are listed on a US exchange and have options listed.
If not, I imagine in-the-money options would probably get a cash settlement for the ITM value at the first market price for whichever pieces weren't listed???
For out-of-the-money, no idea what they'd do.

The Options Clearing Corporation would come up with a rule. They try to find whatever is fairest but doable.

Jim