I'd like to give a quick look at results of this trade in order for others who might run into something like that.
I did end up selling the 12.5/17.5 call spread at around 4.8$: -12.5c + 17.5c
and sold the 12.5/17.5 put spread at around 0.8$: -17.5p + 12.5p
Seemingly giving a risk free profit of 0.6$ per contract.
However:
- i did get early assigned on the 12.5 calls (the same day i took the position) leaving me with stocks short.
- Borrow fees went through the roof the following days, i paid 88.81% p.a. on my short position for 4 days (weekend also due to T+2).
- Exploding borrow fees gave me a sweater, as even after having positions closed you are exposed to a further surge (T+2 settlement).
- i did close part of the put spread and short stock position early.
Final result:
Borrow fees ate up most of the seemingly risk free.
I still did manage to get a profit out of it, i think due to pretty good execution and options market pricing in an even higher borrow fee.
Advice:
- Be aware of borrow cost risk!! You are at the mercy of brokers even after having closed your position due to T+2 settlement.
- If borrow fees went to 200, 300 and more i would have incurred a huge loss having to pay that over the weekend. I've seen borrow fees exploding to >500% (NKLA and also SPRT had huge fees) around special events or when extreme shortage of locates.
