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That's what I thought too, since you don't have the shares your account will go short triggering a margin call, but simultaneously the broker will exercise the long option and close the short position. My broker made it sound like they do It all in one maneuver starting with exercising the long...

Exactly! It doesn't matter how high the stock price goes, the risk is defined at 1k. There should be no requirement to cover the cost of the auto-exercise because it is in-consequential. ABC short 100 contracts @ 4.60 strike ABC long 100 contracts @ 4.70 strike The broker simply exercises the...

I am their client. I take the loss, the broker gets the fees, and the call buyer gets the profits. I have level 3 or whatever because I have a margin account and can short stock and write contracts. My broker doesn't allow naked shorts for the obvious reasons described above. I am only going by...

Apparently they do facilitate the trade: (Short call option) 1. You do not own the underlying stock If you do not own the underlying stock, meaning you wrote a naked call write, then you will end up with short stocks sold at the strike price of the call options. Now, if you do not have enough...

Well then what's the point of entering into a spread at all? If I had the shares, or the money to buy the shares then I would just enter into a covered call and save myself the long call debit...so the only point for the long call then would be to put a cap on your short call losses if the stock...

ABC short 100 contracts @ 4.60 strike ABC long 100 contracts @ 4.70 strike So my maximum risk is 0.10 * 100 * 100 = 1000 How would the assignment procedure be carried out by the broker if: Scenario 1 Price hits 4.80 Short call ITM Long call ITM The broker agent I talked to seemed to think...

Agreed...reverse splits readily get shorted right back down to the pre-split price. I think they are mostly done to jack retail who loaded up on shares at the bottom. It's like the opposite reason for a reverse split where it is done to help retail get in...and readily returns right back up to...

Yes. 10,000 shares of ETF is now trading @ $4 1-5 reverse split (if today) ---> 2000 shares @ $20 ETF was $30 (pre-split) when gold was at its 52 week high. When gold returns to 52 week high, ETF will be $150 (2000 * $130 profit = $260,000) Compare this to if there was no 1-5 reverse split...

I don't think you are grasping the concept here. All I'm asking about is the affect identical market conditions would have on price action following a 1-5 reverse split. Here it is for you to answer if you're so knowledgeable: If a gold ETF that tracks the price of gold via futures contracts...

Ok I think we are all on the same page. I probably used a bad example so just to be clear, if stock abc was an etf that tracked gold, and when gold reached its 52 week high of $2043.3, stock abc reached its 52 week high of $15. So after the 1-5 reverse split I can trade based on a price target...

I understand what a reverse split is. I know it reduces outstanding shares but does not affect market cap. My question is the affect it will have on post split price movement. Will the same market conditions that propelled the pre split stock to it's 52 week high of $15, now propel the price to...

Yes if it literally rises from $10-$15. Let's say that the abc stock had a 52 week low of $3, and a 52 week high of $15, before the split. Then after the split, the price ends up at $15 after a few months. Then the stock rallys due to the same market forces from when it last rallied from $3...

Basically what I am wondering is, if the abc stock is trading at $2, and the 52 week high of the abc stock was $15, then if abc stock returns to its previous high, my scenario would look like this prior to any reverse split: 10,000 shares @ $2 = 10,000* ($15 - $2) = $13 profit per share or...