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Wikipedia has some interesting information on this subject. http://en.wikipedia.org/wiki/Exercise_%28options%29 In particular, note the paragraph under "Early Exercise Strategy". "A common strategy among professional option traders is to sell large quantities of in-the-money calls just...

Thanks all for your replies. I'm actually a covered call writer and just wanted to understand the risk of early exercise. Sometimes I'll sell calls on a company like AT&T with a reasonably large dividend. The site referenced below is where I got my initial information...

I understand why a call option holder may exercise early to capture a dividend on a stock. If they do not exercise, the price of their call will typically drop when the stock goes ex-dividend and the stock price drops by the amount of the dividend. I'm wondering exactly how they capture...

More utility stocks were in the news this week including another one of my holdings. Progress Energy (PGN) was up quite a bit over the last two days. There is nothing confirmed but the news suggests that Duke Energy (DUK) might be interested in acquiring PGN. Both companies have dividend...

I only knew about the merger because I had held AYE for a number of years. Perhaps others can comment on sources for all the various pending mergers. There are a couple mutual funds that get into this area. Take a look at MERFX and ARBFX. By the way, I noted above that AYE jumped 12%...

I should make one correction. AYE is at a discount relative to FE and not a premium. I was thinking in terms of FE relative to AYE. The percentages quoted are correct if considered a discount. I believe successful arbitrage in this case would require AYE to be at a small discount relative...

Thanks for the help. That makes sense now that I think about it assuming the investor retains the Long AYE and Short FE positions. AYE disappears and is replaced with 0.667 shares of FE for each share of AYE. That would offset the short position assuming the investor bought and sold shares...

FirstEnergy intends to buy Allegheny Energy and the approvals are moving along. Each share of AYE would become 0.667 shares of FE. When announced in February, AYE increased in price 12% while FE fell 4.5%. AYE then showed a premium of 15% relative to FE, and the premium has steadily fallen...

Your link states that "You make money allowing people to close contracts out". That is what I suspected, but I wonder why that is necessary in most cases. Maybe it is what FSU stated about not wanting to be exposed to risk which apparently carries for another 90 minutes. A few Calls would...

Thanks for the explanation. What is the significance of 4:30 pm CST? I believe the market closed at 3:00 PM CST. Are you implying that they have 90 minutes to exercise the Calls?

I should have mentioned that selling the Covered Calls opened the position. The position should be profitable even though it is a small amount of money. No commission was charged. I'm just wondering if some option traders will close their position with a buy rather than let the option...

PFE was trading at 17.75 a few minutes before the close today (10/15/10), and I was able to Sell 47 October 18 Covered Calls at $0.01 per share. Why would an option buyer pay even $0.01 with almost no hope of the option being worth anything? The options were $0.25 out-of-the-money. Also...

You are correct on the brokerage. I'm wondering if I was just a little lucky to get the high price of the day on that particular trade. Volume looked high on the open and the stock opened higher than the previous day and then spiked even higher. Maybe there was a large buyer who paid that...

I just had another GTC order executed, and in this case received a higher price than my limit and more than I expected. The order was to sell 250 shares of CEG at 32.35 and the order was submitted on 9/22. Today, 9/24, the stock opened around 32.45 and was up sharply from the previous...

Just wanted to acknowledge your reply as you were absolutely correct on the NYSE opening late and being the primary exchange. I had no idea that markets worked like that especially for the more thinly traded stocks. I've been reviewing the trades starting at 9:30 am trying to understand...

This forum is really a terrific resource and I appreciate everyone's continued help. I attached the response from my brokerage below. I think they are stating that the primary exchange for PCK is the NYSE and that it did not open for normal trading until 9:41 am, at which time the price on...

Thanks again to all and especially for the trade data starting at the open of the market. I appreciate the jpg file from Risktaker and similar data via a private message. It does look as though my brokerage slipped up, but one of you made the point that my order, had it been showing with an...

Thanks all for the help. I just sent a note to my brokerage and will let you know how this turns out. I don't know how they handle GTC orders. Transmitting the order each market day could certainly explain things if they were late. KAWill70

Symbol is PCK and trade was Wednesday 9/08. Closed End Bond Fund and not an ETF. I don't know the time of the execution. KAWill70

I was simply selling a Closed End Bond fund with a GTC order at $10.00. Order had been submitted weeks before and was waiting for the price to rise to $10.00 or higher. On Wednesday the security opened at $10.27. KAWill70