How likely will this CC get assigned?

T

turkeyneck

I'm long BAC stock and sold Jun 07 $27 CC against it. The stock is going ex-dividend on Jun 6 and the call is $1 ITM at the moment. How likely will the stock get called away early because someone wants the dividend?
 
According to this, the dividend is $0.15. The June 07 27 put closed 0.08 x 0.10 and cost of carry for the 6th to the 7th is very little, so if the stock is here or higher tomorrow and the puts are under $0.10, I would exercise tomorrow if I were long the call and save $0.05.

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I think I would kill someone if they early exercised a call in my account without me first/simultaneously picking up the corresponding put.
 
Because you need to purchase the out of the money side before you can exercise the in the money side, otherwise you lose the optionality. That is the entire point of the early exercise formula. It is to determine cost of carry of current position vs. theta of transferring that optionality to the out of the money. Think about a high dividend issue with several weeks to expry. Then think about exercising early, not picking up the otm option, and watching the market crap. OR maybe easier to perceive. Think of those deep calls being against short puts a strike away, exercise those calls and then run a downside risk scenario and you will see why you needed to buy those puts.

The trade-off for early exercise must ALWAYS be analyzed with buying back the OTM.
 
Hilarious, I know you well. If that picture is recent you look exactly the same... and you'll probably remember me as the guy everyone came up to, every month, asking if their damn options should be early exercised :-)
 
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