How do holds work when selling naked options?

[spindr0]

Mike007,

See the link in my previous post for determing margin requirements.

 

[mike007]

Quote from spindr0:

Mike007,

See the link in my previous post for determing margin requirements.

I already know how to do it. MAX LOSS is my margin requirements.

 

[spindr0]

Is there a full moon tonight?

 

[chiguy]

attention all thread members...please stop the flaming and vulgarities...heat is fine...being a jackass is not...keep it civil...this goes for all including the op...thanks

your benevolent moderator

 

[dagnyt]

Quote from spindr0:

The more you post, the more Mark sounds like an expert.

SPIN,

Thanks?

That's supposed to be a compliment?

Best regards,
Mark

 

[dagnyt]

Quote from JJacksET4:

...so, to close, you'd get .05 for your 80, but have to pay .20 for your 90.

a) As you know, no sane person would pay those prices.

b) But if the broker was liquidating your account for some reason, they wouldn't care. They just pay offers and sell bids.

I've actually had Bull Call Spreads go negative on me. However, a person in this situation also knows that in reality, both sides will expire and they won't have to buy the position back. Long calendar spreads can also go negative.

I've seen a post on ET where IB liquidated a bull spread position by forcing the customer to pay a debit to get out of a spread worth far more than zero. It's insanity, but unfair events do occur.

I have never had a cash account to go negative, but I suppose it could happen and I will believe you that the broker wouldn't allow it to remain so. Personally, I would never go to the absolute edge of what I could sell anyways. For example, if I had $4000 in an cash account, I would sell at most a 35 put (quite possibly less) - since it's always good to have some extra money there for adjustments, etc. anyways.

Good idea.

So, there is really nothing big new here IMO - If we're all going to worry about almost impossible scenarios, I think we should just go and buy lottery tickets. Actually I think a more worrysome item realistically is like what apparently happened to that one poster - he was long some GOOG calls, they were out of the money but he didn't close them, they went in the money just barely at expiration and they were automatically exercised for him, even though his account didn't have the money for all those shares.

IMO - The automatic exercise is not a good thing - the call or put holder only should have the discretion of exercising at expiration - it should not be done automatically just because some stupid people forgot to ever do anything with their in the money options.

a) Automatic exercise is a good thing - for the broker who rakes in the commissions. I've been complaining about auto exercise for awhile, but the powers that be love the rule.

b) The option contract stipulates that the option owner has the <i>right</i> but not the <i>obligation</i> to exercise. Apparently no one has attempted to sue the exchanges over the fact that those rights are nullified at expiration - and the exchanges can force the exercise. This is a class action waiting to happen.

c) Agree that worrying about this is nonsense. but when RFT tells me I am wrong about his 'maths' when he cannot explain his thought in understandable English, I'm going to respond.

Best,
Mark

JJacksET4 [/B]

 

[spindr0]

Quote from dagnyt:
That's supposed to be a compliment?

Well, if you thought that you were an expert then I suppose it wouldn't be a compliment. But if you're just a very knowledgeable sharing his experience then it is (am I off the hook?)

Keep the faith!

 

[spindr0]

c) Agree that worrying about this is nonsense. but when RFT tells me I am wrong about his 'maths' when he cannot explain his thought in understandable English, I'm going to respond.

It's a lot more fun to run someone around in circles with convoluted descriptions than to actually provide real numbers that support the "maths" premise. Kinda reminds me of another BB.

It appears that Houdini has left the BB-Ba-building.

 

[dagnyt]

Quote from spindr0:

(am I off the hook?)

Keep the faith!

Absolutely!

 

[oncemore]

Re:

"IMO - The automatic exercise is not a good thing - the call or put holder only should have the discretion of exercising at expiration - it should not be done automatically just because some stupid people forgot to ever do anything with their in the money options.

a) Automatic exercise is a good thing - for the broker who rakes in the commissions. I've been complaining about auto exercise for awhile, but the powers that be love the rule.

b) The option contract stipulates that the option owner has the right but not the obligation to exercise. Apparently no one has attempted to sue the exchanges over the fact that those rights are nullified at expiration - and the exchanges can force the exercise. This is a class action waiting to happen."


Contact your broker and ask about a do not exercise or contrary intention request. I think it usually entails a phone call you must make to your broker before the end of trading on the day of expiration.