Options Question: Max Risk

[dagnyt]

Quote from staffpro:

so regardless of account size those shares were obviously bought on margin...

This is something many traders don't recognize. They think that if their account is too small, the broker will not exercise the options.

What they don't understand is the it's the OCC, not the broker, who distributes assignment notices to the brokers. Then each broker has a method (either random or predetermined) for how they allocate the assignment notices to individual accounts.

But account size, and willingness of the assignee to accept assignments are never considered.

Mark

 

[daddy'sboy]

Quote from CPTrader:

A basic question: If in an option spread position is constructed at a debit, i.e. you outlay premium to put on the spread, is your maximum risk always limited to the premiuum paid/ i.e. the initial debit?

No, as has already been mentioned in other replies. However noone seems to have mentioned pin risk nor the risk of the OEX SET price.
db