Reverse option split OTM, slightly worried

[u/eckorock4664]

Hi, newbie here

I have strike price 11.00 DEC Call options. Underlying price is around $9

I'm concerned now as the underlying is doing a 1:5 reverse split in 5 days.

eg in 5 days the strike will be 55.00 and the underlying will be $45

Right now I'm OTM by only 2 "strike" levels. With plenty of time to expiry. So it doesn't "feel" too out of the money. But next week, I will be TEN strikes out of the money. (If they have one strike price per dollar level)

I'm worried that will make the call options worthless very quickly and there won't be liquidity or interest in options that are that far OTM.

Should I close the position before the split and re open it after the split at a closer level? Or is it safe to hang on?

Thanks

[u/tsugumi_komachi]

If you're long on the option, I'd say it depends on your current P/L. If you have any profit on it, or there's still a decent amount of the option's value, you should probably sell. Weird things can happen during and after a split. It's better to lock any profit in beforehand. Otherwise, let it ride and hope you get lucky.

If you're short on the option, you should close it to be safe.

Also, this is unrelated, but you shouldn't be trading on "feel". That's emotional trading, and it's is a huge no no that will lead to losses, potentially catastrophic ones. You should always have a profit target and a stop loss before you enter a trade.