Early assignment on my Jan 19, 2013 calls???

[noob_trad3r]

I sold 35 calls on some of my SPY position on the 19th of nov Strike price of 139 (average price 135.28 for the long stock position) and was hoping to grab the dividend as well.

It goes Ex-dividend on Dec 21 (Calls expire Jan 19 2013)

Extrinsic value shows 62 cents.

The dividend looks to be 79 cents. Correction, 88 cents dividend. Now it makes sense why extrinsic dropped faster than expected.

So what do you think.

 

[FSU]

Quote from noob_trad3r:

I sold 35 calls on some of my SPY position on the 19th of nov Strike price of 139 (average price 135.28 for the long stock position) and was hoping to grab the dividend as well.

It goes Ex-dividend on Dec 21 (Calls expire Jan 19 2013)

Extrinsic value shows 62 cents.

The dividend looks to be 79 cents. Correction, 88 cents dividend. Now it makes sense why extrinsic dropped faster than expected.

So what do you think.

The key to whether you will be assigned is where the same strike puts are trading just before SPY goes ex. When someone exercises their calls for a dividend they are essentially selling the puts for the dividend amount, less cost of carry. If they can buy the put for less then the dividend and interest cost, it is a good exercise.

 

[noob_trad3r]

Quote from FSU:

The key to whether you will be assigned is where the same strike puts are trading just before SPY goes ex. When someone exercises their calls for a dividend they are essentially selling the puts for the dividend amount, less cost of carry. If they can buy the put for less then the dividend and interest cost, it is a good exercise.

Cool I did not know that. I always just looked at the remainder of the value of the call premium - intrinsic value VS dividend amount.

 

[noob_trad3r]

Looks like I did not get my long SPY called away. But will collect a nice 20% increase in dividend. Thanks to the Boehner Bonus.

SPY dividend was at 1.0218

The 139 put last print was 1.02
BID .98 ASK 1.02
Range 1.02 - 1.23

139 call last print 6.37
bid 6.27 ask 6.49
range 5.40 - 6.37

interesting that the time premium jumped to 1.28 from about .20 yesterday.

So it traded at parity pretty much with the dividend.