If the calls are ITM at expiration they would be automatically exercised. Sounds like he got auto exercised at his strike price but Monday had to sell the stocks for a loss. Some good advice when trading a stock like GOOG on expiration Friday when its earnings are coming out is use the next month not the current for long plays like that.
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Are naked puts really this safe????
- Thread starter RedDuke
- Start date
If the calls are ITM at expiration they would be automatically exercised. Sounds like he got auto exercised at his strike price but Monday had to sell the stocks for a loss. Some good advice when trading a stock like GOOG on expiration Friday when its earnings are coming out is use the next month not the current for long plays like that.
Quote from chewbacca:
an option buyer has the RIGHT NOT THE OBLIGATION to take delivery of the underlying on an ITM option at expiration
I've been complaining about this issue for awhile now, but no one cares. Here's ax example from my blog: http://blog.mdwoptions.com/options_for_rookies/2008/06/warning-about-t.html
The RIGHT to decide disappears at expiration, and any option that finishes ITM is automatically exercised.
The option owner has the OBLIGATION to notify his broker NOT TO EXERCISE if he does not want to take delivery.
Doesn't seem fair, but it's a great benefit to the brokers who charge exercise/assignment fees and then again when the customer covers the unwanted stock position.
These rules are for the broker, but for the investor/trader.
Did a silly thing last night, sold a put, when I really do not know what I am doing. So now I am not sure what to do. It was in the money when I sold it, as that was the only decent premium. But no money showed up in my account, instead I am showing a loss on the position. Confused, as I thought by selling a put I would recieve the premium. I already own some of the stock, and would like to own more, hence my reasoning for selling a put. Any suggestions on what to do now? What is going to happen?
Many thanks from a nooobe
Many thanks from a nooobe
Quote from ZEAK:
Did a silly thing last night, sold a put, when I really do not know what I am doing. So now I am not sure what to do. It was in the money when I sold it, as that was the only decent premium. But no money showed up in my account, instead I am showing a loss on the position. Confused, as I thought by selling a put I would recieve the premium. I already own some of the stock, and would like to own more, hence my reasoning for selling a put. Any suggestions on what to do now? What is going to happen?
Many thanks from a nooobe
Need some more info.
What stock?
What selling price of the option and stock at time of sale?
What strike and expiry?
Are you using leverage? (do you have cash to back up the possible assigment or are you using the stock you have as collateral?)
Writing a call against the underlying that you do own could be a possible opposite bet.
Where do you think the underlying is going and why?
The stock was TCK.B.TO
TCK.B SEP08 40 P
Sold the put at 11:53, not sure what the stock was at, 39 something.
No leverage, just short one put. Got filled at 1.68.
I think 38 is some good support for it, so I guess I am hoping for a bounce and for the put to expire worthless. But I do have the cash for the possible assignment.
For the longer term I still like the stock and would like to build up a larger position. Thought I could do it by selling naked puts, but I realize that I need to learn more about options first. Kinda jumped the gun on this one.
Thanks for your help
TCK.B SEP08 40 P
Sold the put at 11:53, not sure what the stock was at, 39 something.
No leverage, just short one put. Got filled at 1.68.
I think 38 is some good support for it, so I guess I am hoping for a bounce and for the put to expire worthless. But I do have the cash for the possible assignment.
For the longer term I still like the stock and would like to build up a larger position. Thought I could do it by selling naked puts, but I realize that I need to learn more about options first. Kinda jumped the gun on this one.
Thanks for your help
Quote from ZEAK:
The stock was TCK.B.TO
TCK.B SEP08 40 P
Sold the put at 11:53, not sure what the stock was at, 39 something.
No leverage, just short one put. Got filled at 1.68.
I think 38 is some good support for it, so I guess I am hoping for a bounce and for the put to expire worthless. But I do have the cash for the possible assignment.
For the longer term I still like the stock and would like to build up a larger position. Thought I could do it by selling naked puts, but I realize that I need to learn more about options first. Kinda jumped the gun on this one.
Thanks for your help
If your reason for selling the put is you want to accumulate more stock then you are fine.
If you get assigned you saved a little vs just buying it at that time. If Teck Cominco is above 40 by next Friday, then just do it again for the October expiry.
Another (bad) reason for selling a put is idea that "there is no possible way the stock could go THAT low" and someone invariably sells a bunch of puts with a 5% margin requirement. Then bad things happen causing enormous intake of Pepto Bismol.
Also want to add that if this trade works out for you - do not get overconfident and increase your bet. Be prepared to buy what you could be asked to.
Quote from ZEAK:
Did a silly thing last night, sold a put, when I really do not know what I am doing. So now I am not sure what to do. It was in the money when I sold it, as that was the only decent premium. But no money showed up in my account, instead I am showing a loss on the position. Confused, as I thought by selling a put I would recieve the premium. I already own some of the stock, and would like to own more, hence my reasoning for selling a put. Any suggestions on what to do now? What is going to happen?
Many thanks from a nooobe
Just my opinion but based on your post I would just get out. You're clearly uncomfortable, don't feel you know what you're doing, don't have a clear reason for being in the trade, and don't have a plan. Classic recipe for disaster.
when the cycle is complete, or you close the position, your account will reflect the premium recieved. in the simplest terms if the put expires out of the money you will get the cash. if the put expires in the money you get the stock. if you close the position early you get or pay the difference between what you sold it for and what market value is.Quote from ZEAK:
Did a silly thing last night, sold a put, when I really do not know what I am doing. So now I am not sure what to do. It was in the money when I sold it, as that was the only decent premium. But no money showed up in my account, instead I am showing a loss on the position. Confused, as I thought by selling a put I would recieve the premium. I already own some of the stock, and would like to own more, hence my reasoning for selling a put. Any suggestions on what to do now? What is going to happen?
Many thanks from a nooobe
you dont seem to have enough knowledge to play this game but playing with just one put and watching it play out should be educational as long as you have enough money in the account to manage worst case senario.
Quote from BeatingtheSP500:
If your reason for selling the put is you want to accumulate more stock then you are fine.
If you get assigned you saved a little vs just buying it at that time. If Teck Cominco is above 40 by next Friday, then just do it again for the October expiry.
Another (bad) reason for selling a put is idea that "there is no possible way the stock could go THAT low" and someone invariably sells a bunch of puts with a 5% margin requirement. Then bad things happen causing enormous intake of Pepto Bismol.
Also want to add that if this trade works out for you - do not get overconfident and increase your bet. Be prepared to buy what you could be asked to.
Thanks for your thoughts. I have no intention of using leverage, and will take the stock if assigned to me and will look to learn more about options before I trade again. Right now its not looking so good, but will leave it to play out.
Quote from vhehn:
when the cycle is complete, or you close the position, your account will reflect the premium recieved. in the simplest terms if the put expires out of the money you will get the cash. if the put expires in the money you get the stock. if you close the position early you get or pay the difference between what you sold it for and what market value is.
you dont seem to have enough knowledge to play this game but playing with just one put and watching it play out should be educational as long as you have enough money in the account to manage worst case senario.
Ok, thanks for breaking that down for me. Understood.
This is educational, not fun though, as it cut through support at 38 and kissed 35. For a split second there something in me said "sell another one, quick!" But I know that is just fear talking and was able to ignore it....just. I will let it play out as at the moment I can handle the worst case, want to keep it that way.
Thanks for your thoughts!