Today I want to address our BBWI and VSCO stock holdings, as well as the BBWI1 option from the LB spin-off.
For the time being we are going to continue to sit on this position as the BBWI1 options markets are very wide, and illiquid. I would expect those markets to tighten up in the coming days.
Stepping back, the whole spin-off was what Cabot Top Ten Trader chief analyst Mike Cintolo might refer to as a “nothing burger” … there was no great money to be made or lost, as the Options Clearing Corporation (OCC) and the options world tied all three components together.
Now let’s get into the nitty gritty of the LB spin-off …
If you are interested in the math, and looking to get a bit of an ice cream headache, here are the details:
Essentially, BBWI and VSCO stocks, and the BBWI1 option, are moving in tandem. Here is the math to illustrate this via the OCC:
For purposes of calculating a BBWI1 option price for use in expiration processing, OCC will use the following formula: BBWI1 = BBWI + 0.333333 (VSCO)
As of the close Monday, BBWI closed at 61.5, and VSCO closed at 69.25.
So the equation would be BBWI1 = 61.50 + 0.333333 x 69.25, or 61.50 + 23.083 = 84.58.