I trade a lot of credit spreads, so when the market does what I expect, I often have a lot of worthless options as I near expiration. I typically close these to free up the margin for use elsewhere, but between the spread and commissions, I'm often looking at 10% of the maximum profit I could otherwise take if held till expiration.
I'm comfortable with the risks of assignment, and often just put a contingent order on the underlying within 0.XX of the strike to close with a market order for the waning hours of its life.
I keep a float in my account that is basically the cash I have for next months bills--so the risk level on this is cash, and losing this would cause a cascade of undesirable problems. But this would be sufficient to cover the spreads on the expiring options.
So, if I keep these expiring options open through Friday's close, with a contingent order if the ask gets anywhere near the strike (...say 99.80 with a $100 strike on a $2 spread), is there a chance the market close order could not get filled as the price shot passed it? Like could a massive order come in on the closing bell, and push it to $100.02. Then the nightmare scenario is that I get assigned and am holding a short position while it gaps to $104 the following Monday wiping out my entire trading account.
So, am I guaranteed a fill in this scenario? Is there any risk I'm overlooking?
For clarity, here's the sample closing order for ABC at 99.50:
if ABC ask > 99.80 place market buy close on ABC May 19 $100 call
I'm comfortable with the risks of assignment, and often just put a contingent order on the underlying within 0.XX of the strike to close with a market order for the waning hours of its life.
I keep a float in my account that is basically the cash I have for next months bills--so the risk level on this is cash, and losing this would cause a cascade of undesirable problems. But this would be sufficient to cover the spreads on the expiring options.
So, if I keep these expiring options open through Friday's close, with a contingent order if the ask gets anywhere near the strike (...say 99.80 with a $100 strike on a $2 spread), is there a chance the market close order could not get filled as the price shot passed it? Like could a massive order come in on the closing bell, and push it to $100.02. Then the nightmare scenario is that I get assigned and am holding a short position while it gaps to $104 the following Monday wiping out my entire trading account.
So, am I guaranteed a fill in this scenario? Is there any risk I'm overlooking?
For clarity, here's the sample closing order for ABC at 99.50:
if ABC ask > 99.80 place market buy close on ABC May 19 $100 call
