If both options expire in the money

T

Twinsen

Hi guys. I have a question here.
E.g. stock is at 50. I have sold call at 45 and put at 55 (short guts spread).
Both options are in the money and will expire in the money. What position will I get when they expire and I am assigned? Will they cancel each other or what will happen?

Thank you.
 
You mean I can have short and long stock positions simultaneously (my broker is interactivebrokers)? So long stock bought at 55 and short stock sold at 45?
 
Twinsen said:
Hi guys. I have a question here.
E.g. stock is at 50. I have sold call at 45 and put at 55 (short guts spread).
Both options are in the money and will expire in the money. What position will I get when they expire and I am assigned? Will they cancel each other or what will happen?

Thank you.
More...

You will have no position after expiration if you get assigned on both? What was the reason to sell the guts vs the 45 puts and 55 calls? The OTM options are more liquid with tighter markets and provide less risk from corporate actions.
 
Twinsen said:
You mean I can have short and long stock positions simultaneously (my broker is interactivebrokers)? So long stock bought at 55 and short stock sold at 45?
More...
No, you can't hold a long and short position at IB - they will net them.
 
No, I do not use this guts spread in trading but I just wondered what would be if both shorts expired in the money. Because I think what is better - iron butterfly (short put and call at the same strike) or iron condor with shorts slightly in the money (one strike ITM) which could provide more juice (in comparison with iron butterfly) on opposite spread if stock moves through one of the wing. How do you think which one is better?
 
Twinsen said:
No, I do not use this guts spread in trading but I just wondered what would be if both shorts expired in the money. Because I think what is better - iron butterfly (short put and call at the same strike) or iron condor with shorts slightly in the money (one strike ITM) which could provide more juice (in comparison with iron butterfly) on opposite spread if stock moves through one of the wing. How do you think which one is better?
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IMO, in general, that is backward thinking. There is no best spread that you can use all the time to make money with risk/reward included. IMO, you need to examine market conditions, have an expectation of what will or won't happen, then examine market expectations by looking at option prices and skews and then find the options that best meet your expectations.

Doing the same spread over and over in every market condition is making the assumption that current supply/demand that creates the daily prices is consistently wrong. I would not make that assumption.
 
Twinsen said:
You mean I can have short and long stock positions simultaneously (my broker is IB)? So long stock bought at 55 and short stock sold at 45?
More...

I haven't had that experience at IB, but at another broker I've had newly-assigned longs fail to net against existing shorts and I've had to contact them. Maybe they allow it because some clients want to manage tax-lots for efficiency, or maybe it's just an operational error. I don't know -- I'm not an ops guy.
 
Deuteronomy_24_7 said:
I haven't had that experience at IB, but at another broker I've had newly-assigned longs fail to net against existing shorts and I've had to contact them. Maybe they allow it because some clients want to manage tax-lots for efficiency, or maybe it's just an operational error. I don't know -- I'm not an ops guy.
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My experience with IB was the same, they always net you to a zero position.
 
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