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I just got an assignment...HELP
- Thread starter maae10
- Start date
Quote from stylark3:
I would like to post an addendum to this previous remark.
I believe the ideal situation in writing covered calls against
your stock ownership at this point would be to have the
stock price move sideways for a while. So, if you think the
stock price will start an uptrend then just sell the stock later
for a higher price and/or buy calls. If you think the stock
will drop more then buy puts or just get out of your ownership
position altogether. On the other hand, you could follow the
post above and write covered calls against you stock ownership
anyway in which case, if the stock drops more, your covered
calls will increase in value but the dropping stock
price will weigh against your gains in the account as it continues
to drop.
The way I'm looking at it now I think the stock is going to be sideways for the next 2 weeks and then start to rise. I want to sell the puts now in case the stock pops earlier then I expect.
What I did was sell the shares and then sell puts at a lower strike price to thwart another assignment.
Quote from maae10:
The way I'm looking at it now I think the stock is going to be sideways for the next 2 weeks and then start to rise. I want to sell the puts now in case the stock pops earlier then I expect.
What I did was sell the shares and then sell puts at a lower strike price to thwart another assignment.
Ok, so now you are in a naked put position again?
Well, if this is the case, make sure that you close out
the position if the stock price should threatens your
break-even position in order to avoid another excercise.
It is my understanding that conceivably, you could select options
on stocks that will remain at or above the strike price and earn
profits repeatedly over time by selling puts without the threat
of excercise. However, it takes only one dip in price (gap
down) to be exposed to excercise, and this risk cannot be overlooked. So, you should always be ready to purchase the
shares at the strike price you specify -- which you consider
to be a fair price for the stock.
The two books everyone should read before trading options:
1. Option Volatility & Pricing - Natenberg
2. Options, Futures & Other Derivatives - Hull
You sold AAPL May 07 $115 Puts? There is only an open interest of 3 on those puts....thats your position i assume?
<B>Theoretical Data</B>
Implied Vol. 56.7807
Delta -0.9197
Gamma 0.0104
** Theta -0.0225 **
Vega 0.0375
Rho -0.0827
If your going to keep that position open you better hope AAPL stays above its 50 day moving average (which is around $89.75), a break below that will be bad news.
1. Option Volatility & Pricing - Natenberg
2. Options, Futures & Other Derivatives - Hull
You sold AAPL May 07 $115 Puts? There is only an open interest of 3 on those puts....thats your position i assume?
<B>Theoretical Data</B>
Implied Vol. 56.7807
Delta -0.9197
Gamma 0.0104
** Theta -0.0225 **
Vega 0.0375
Rho -0.0827
If your going to keep that position open you better hope AAPL stays above its 50 day moving average (which is around $89.75), a break below that will be bad news.
Quote from MTE:
Great point! And the key to avoiding assignments is knowing when and why are options assigned/exercised early.
Actually, MTE, I mispoke a little.
She actually would know what she was going to get if
the option were excercised because of the strike price specified.
But, the price of the stock may have gapped much further
down than the strike price at which she must purchase
the shares. Therefore, she can end up with some very
expensive stock in her account which will translate to a big
loss if the stock is sold immediately -- and that would be the
wipe out.
Correct?
Quote from stylark3:
Actually, MTE, I mispoke a little.
She actually would know what she was going to get if
the option were excercised because of the strike price specified.
But, the price of the stock may have gapped much further
down than the strike price at which she must purchase
the shares. Therefore, she can end up with some very
expensive stock in her account which will translate to a big
loss if the stock is sold immediately -- and that would be the
wipe out.
Correct?
Yes, the stock can gap down and you'd end up with a big loss. I know what you meant.
In any case, as I mentioned above, selling (writing) options requires you understand the mechanics (i.e. the reasons) of early assignment, if you don't understand the mechanics then you shouldn't be selling options as you have no way of gauging the assignment risk.
Quote from Tums:
don't worry, the market is making new high everyday. You can sell all the puts you want... until the black swan returns.
I was betting that C and WMT would stay put and took losses on both of those. Ironically my losses this month was on the less volatile stocks and my winners were on the volatile stocks.
Many of my picks are stocks that I'm betting will stay in the same price range so any big movement doesn't bode well for me.