Exercise the long calls at $196.00
Your broker isn't obligated to exercise a long call that's OTM.
OPtionshouse closed my expiring position without my consent
- Thread starter bthale
- Start date
Your broker isn't obligated to exercise a long call that's OTM.
If I was assigned the 195 short calls, then I now am short $12000 worth of SPY ETF. $12000 and NO MORE. That is my TOTAL risk. I can't lose more than $12000, and there is no risk to the broker because my cash on hand is more than 3 times the $12000.
If SPY had closed at 195.95 and opened the same on Monday, then I buy it back and lose $95 per contract. If it went to 196.50, then I am now short at 195 and long at 196, which means I lose $100 per contract. Maximum.
If there is another scenario where I could lose more, by all means, present it. Keep it civil if you don't mind. Calling me a dumbass doesn't help. I know what I'm doing and I know what I'm risking. If you think the risk is stupid, then you shouldn't take the risk.
If SPY had closed at 195.95 and opened the same on Monday, then I buy it back and lose $95 per contract. If it went to 196.50, then I am now short at 195 and long at 196, which means I lose $100 per contract. Maximum.
If there is another scenario where I could lose more, by all means, present it. Keep it civil if you don't mind. Calling me a dumbass doesn't help. I know what I'm doing and I know what I'm risking. If you think the risk is stupid, then you shouldn't take the risk.
Wait, didn't you say you were short 120 contracts at 195? Because if so, you are miscalculating your risk. Sorry for the editing the site is super slow. Each contract is worth 100 shares so if you were put the short calls for every one contract your account would now show short 100 shares. They could care less about your long 196 unless the stock was over 196.
As others have mentioned you would be short 12,000 shares of SPY. At 195 that's $2,340,000 worth of stock and a plus $1,000,000 margin call. Being short the stock, you have a potential unlimited loss. Can you see why the brokerage firm didn't want to take this risk?
You are short 12,000 SHARES, not $12,000. That's $2.3 million.
Your risk is, theoretically, unlimited. Granted it is low probability, but what if some crazy good news happened over the weekend and SPY opened UP $10/share, (or $5/shr, whatever)?
Say goodbye to your $50k account...
Your risk is, theoretically, unlimited. Granted it is low probability, but what if some crazy good news happened over the weekend and SPY opened UP $10/share, (or $5/shr, whatever)?
Say goodbye to your $50k account...
Did you work out the margin call you would have recieved had you been assigned the shares yet? Could that have something to do with your missing 120 dollars?
Respectfully asked: Just curious, who taught you this method of trading?
It was a Credit Spread, Options 101. The trade must have been profitable. My guess the reward:risk ratio was about 1:20. Credit $600, $12,000 risk.
You really should not be lecturing on Options 101. We all understand it was a credit spread. What many don't seem to understand is that closing between the strikes upon expiry puts the call seller in a position of large risk due to the notional value of the short leg.
Put it this way -- how well would you sleep if you were somehow short $2M+ on a $50K account over the weekend?
Put it this way -- how well would you sleep if you were somehow short $2M+ on a $50K account over the weekend?