Options Traders Who Correctly Bet Against Russia Can’t Cash Out

(Bloomberg) — As Russia began its invasion of Ukraine, Jennifer Stockman wagered against the aggressors.

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Stockman, who helps raise money for a health-care organization, bought put options on a Russia-linked fund using her personal accounts at Fidelity Investments and Charles Schwab Corp.’s TD Ameritrade.

The bet looked like a winner. The ruble plunged along with exchange-traded funds tied to Russian securities as other nations imposed crippling sanctions. But now, with Russia’s stock market frozen and securities tracking Russian assets halted, Florida-based Stockman can’t cash in.

Instead, in both accounts, she found herself hamstrung and unable to exercise her put contracts on the VanEck Russia ETF, some of which are set to expire Friday. The puts were worth about $6,000 combined when trading in the fund was halted.

“I’m not a Wall Street person, I’m a regular person, so it’s a lot of money to me.” Stockman said. “It’s even more frustrating that it was a good trade and it was a good position to take, and I know that I was right.”

Stockman, 38, is one of an untold number of options investors whose seemingly prescient bets against Russian securities may wind up worthless.

Margaret Farrell, a Schwab spokeswoman, said in an email that the firm is “making every effort to be as flexible as possible in allowing our clients to reduce their risk exposure by continuing to allow clients to exercise options consistent with our policies.” She declined to comment on Stockman’s case.

Susan Coburn, a Fidelity spokeswoman, declined to comment.

At stake is about $370 million: That’s the value of open interest on all put options expiring this year for a group of Russia-tied securities, including the VanEck Russia ETF, Direxion Daily Russia Bull 2X Shares, Yandex NV, Qiwi Plc, Ozon Holdings Plc, Mobile TeleSystems PJSC and Mechel PJSC, according to data compiled by Bloomberg.

Now brokerages are trying to figure out how to respond. The problem is that individual investors like Stockman hold options contracts allowing them to sell shares of Russian-linked securities. But with the instruments halted in U.S. trading (and with the Moscow Exchange closed), it’s unclear whether traders will be able to exercise the contracts at all.

The firms have been inundated with customer complaints.

Options Clearing Corp., an anchor of the marketplace, also shifted its policies. Under normal circumstances, the clearinghouse automatically clears options transactions that are in the money — or when the strike price exceeds the market value of the underlying security. For options on a group of Russian securities, however, OCC said it won’t automatically clear the transactions.

Jeff Porter, a 36-year-old attorney based in Arizona, owns puts on the VanEck Russia ETF expiring this Friday that were worth about $50,000 at the time the fund was halted. He, too, can’t exercise his options because Fidelity told him there aren’t shares available to borrow to facilitate such a transaction, he said.

“It feels like the market doesn’t permit you to be too correct,” Porter said. The experience has “certainly made me question the value of options as a hedge or as an investment if they can just be wiped off the table arbitrarily.”