Can one leg of an IC get exercised?

You have been so helpful. I appreciate it all. So, all other things being equal, I'll get the short IC for $246 credit/$354 max risk. Exit strategy is to peel away at 50% max profit or $123. It's a wide spread ($10) and I'll hope for the best. Thanks for the exit before expiration hint.
 
It seems to me that the market has not yet entered its usual framework and it is quite difficult to work today. Because now absolutely new levels have been formed, which on the one hand allowed us to absolutely look at the market and its prospects, and on the other hand they have broken all the usual format of life. And now it's much harder to make some long-term forecasts, so I'm still working with caution and only in small amounts. And I envy traders like you, who have already started working more actively with the market. This is really cool, and it speaks about your professionalism. I hope that in the near future I will be able to participate more actively in such discussions.
 
Ok good. I just asked as you focused on early exercise of the puts but didn't mention early exercise of the calls. Early exercise of your short calls would have you short the underlying which is no big deal in your account. In a retirement account you would have to close the short position which isn't a big deal... but a newer trader might not be aware. Again, this would not be the case for you.
 
@luckyfnlou - the point of an IC is that you don't end up either long or short stock regardless of price movement; the wings cap your loss and essentially prevent you from needing to do anything with stock. It's pretty much the default trade in retirement accounts.
 
BlueWaterSailor said:
@luckyfnlou - the point of an IC is that you don't end up either long or short stock regardless of price movement; the wings cap your loss and essentially prevent you from needing to do anything with stock. It's pretty much the default trade in retirement accounts.
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Thanks Blue... I get ya. You are experienced and would understand. OP appears to be a new trader and a 1 dollar spread on IC seems like an unlikely worry for early assignment yet he worried about assignment of puts. I find new traders only worry about puts but when they get their first assignment of short shares they freak. I know it isn't a big deal but was just trying to bring it up. One day he may sell ICs with a larger spread or put on a bwb and find some of his ITM calls are assigned. Retirement accounts don't allow holding the short shares long time thats all I was getting at. Some peeps are not even used to having short positions so I think it is important that they understand this risk.
 
@luckyfnlou - I get your point. I addressed it earlier by talking about expiration risk, but - from personal experience - you can indeed hold ICs to expiration in retirement accounts (as I did in my early trading days.) This does bring up an interesting question: exactly what does "not allowed to hold a short position" mean? What happens if you have an IC in an IRA and one of its short legs gets exercised after expiration? Seems like the broker would be required to auto-exercise the long (TradeStation certainly does this; in fact, you have to call them and specifically instruct them not to, if that is what you want.)

It is, of course, best to avoid the whole issue and close the position before expiration - but it would still be useful to know what your broker's policy is, in case you get run over by an 80-year-old lady with shopping cart and a desperate need for toilet paper.
 
BlueWaterSailor said:
@luckyfnlou - This does bring up an interesting question: exactly what does "not allowed to hold a short position" mean? What happens if you have an IC in an IRA and one of its short legs gets exercised after expiration? Seems like the broker would be required to auto-exercise the long (TradeStation certainly does this; in fact, you have to call them and specifically instruct them not to, if that is what you want.)

It is, of course, best to avoid the whole issue and close the position before expiration - but it would still be useful to know what your broker's policy is, in case you get run over by an 80-year-old lady with shopping cart and a desperate need for toilet paper.
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The older I get the more I am aware I may die before closing a trade... something to think about lol.

Of course this doesn't apply to the OP as he said he isn't trading in a retirement account.

Me bringing this up on a thread about ICs was a poor choice. Since you asked... once assigned the short position my broker emailed me letting me know I had til eod to close it or they will. Very simple to adjust as long as you monitor your positions closely. In my case the early exercise was on part of my short calls in a spy butterfly so obviously much more likely than in an IC.

I was trying to be helpful as early assignments can surprise new option traders. Early assignments are not a big deal... just wanted to bring up the difference in retirement accounts. Easy to adjust.
 
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