Sell Puts and after hours
- Thread starter S2007S
- Start date
Robert Morse
Sponsor
If I were long an option, that settled just OTM, and after hours I could hedge that put or call, I would and submit an exercise. E.G. Stock closes at 50.25. I'm long 10 of the 50 puts, and they just expired. At 4:30, news comes out and the stock is trading at 49.50. I'm 100% going to buy 1000 of that stock at 49.50 and submit an exercise exception before my broker's cut off. Yes, I need the available BP to do that. On the other side, if the stock had closed at 49.50, but was trading after the close at 50.25, I can submit an exception to not exercise and sell that stock short. Does that help?
Are you suggesting Portfolio Margin?
Robert Morse
Sponsor
I'm suggesting that if you only trade options, and the stock drops and you want to buy 1000 share of a stock vs the options you want to exercise, you need cash for it. PM is not required as the position only lasts until next day.
I'm using margin when I trade these sell puts
And not cool that 2 of my sell puts were voided hours late only because the etf moved higher after hours. Even though it closed below my assigned price....not cool at all.
I'm no option expert. I recently started selling puts against certain etfs.
Sell puts ...meaning I sell 1 put against Intel at $42, let's say for a credit of 23 bucks expiring tomorrow February 2nd..
I collect the 23 dollar credit. If Intel closes above 42 I still keep the credit however if Intel falls below 42 by the close to say $41.17 I'm now assigned the 1 contract of 100 shares of Intel at $42....and I still keep the credit either way, assigned or not
You know options so I'm sure there was zero reason for me to explain the sell put scenario!
I know what the word sell means, and I know what a put option is.
But using the expression "sell put" as a noun phrase, i.e., as a thing that you trade is not how option traders talk in the USA, and it is not how people in other countries talk about the US options markets when they are speaking English.
Your anomolaous usage suggests that there is something fundamental that you do not understand, and this creates a lot of ambiguity. It was not clear to me from your original post whether you had sold a put or were holding a put, and expected to sell the stock through the automatic exercise process that normally occurs if the stock closes below the strike price at expiration.
The response to your original post by Robert Morse indicates that he may have thought you bought a put option. But in fact you have just stated that you sold a put.
Most traders would say something like "I was short 3 puts and only one of them was assigned." Or something like that.
Like I said I know almost nothing about options, I kmow only the simple basics of what they are and the very rookie meaning of these terms. All I know is that I only do sell outs and sell calls because they are more straight forward and understand the basics of them.
So far doing sell puts has made me more money than any other options I have traded.
I do an occasional sell call once I'm assigned the shares to make more additional credit.
Okay, well, whatever
I don't think you have provided enough information about what you experienced to get a real answer or explanation. But I can tell you this:
If you sell a put option, the decision about whether the option will be exercised rests entirely with the party who bought the option from you, and to some degree with that party's broker. It is not your decision, and you have no control over it. The party who bought the put option you sold has the right, but not the obligation, to exercise the put and sell the stock to you at the strike price.
Even if the stock price is below the strike price when the market closes on expiration day, it is possible that the put option you sold will not be exercised. Likewise, if the price of the stock is above the strike price at expiration, it is possible that the put will be exercised.
To answer the question you posed in your original post, no, when you sell a put there is no guarantee that you will actually buy the stock at the strike price, regardless of what the closing price is on the day of expiration.
It is not common for a put to be exercised if the stock price is above the strike price. And if the stock price is below the strike price, it is unusual for holder to decide not to exercise. But there is no guaranteed outcome for the party that sold the put.
There are many reasons for these anomolous outcomes. Changes in the price of the stock during after-hours trading is one possibility. There are others. Most brokers have an "automatic exercise" policy. But if the party holding the put option does not own the stock, then exercising the put will result in a short sale.
It is is possible to buy a put option, without owning the stock, in a brokerage account that is not approved to sell stock short, or in an account that does not have enough equity to support selling short 100 shares of that stock.
If the stock price is below the strike price at expiration, and the holder does not own the stock and is not permitted to sell the stock short, then...
... in the name of all that is holy, the holder of the put should sell the put.
But if they don't do that, the broker is not obligated to perform an automatic exercise if the account cannot sell the stock short. If the holder takes no action and the broker takes no action, the put will expire worthless and will not be exercised.
I strongly recommend that you stop using the expressions sell put and sell call as noun phrases. That is not how options traders talk about these trades and people are not going to understand you.
Sell is a verb. Use it that way.
Don't say: I did a sell put.
Do say: I sold a put. Or: I am short one Feb 9 35 put.
Don't say: I did a sell call.
Do say: I sold a covered call. Or I wrote a covered call. (Both of which mean that you sold a call while holding the stock.)
Or: I am long the stock and short the Feb 9 35 call.
I don't think you have provided enough information about what you experienced to get a real answer or explanation. But I can tell you this:
If you sell a put option, the decision about whether the option will be exercised rests entirely with the party who bought the option from you, and to some degree with that party's broker. It is not your decision, and you have no control over it. The party who bought the put option you sold has the right, but not the obligation, to exercise the put and sell the stock to you at the strike price.
Even if the stock price is below the strike price when the market closes on expiration day, it is possible that the put option you sold will not be exercised. Likewise, if the price of the stock is above the strike price at expiration, it is possible that the put will be exercised.
To answer the question you posed in your original post, no, when you sell a put there is no guarantee that you will actually buy the stock at the strike price, regardless of what the closing price is on the day of expiration.
It is not common for a put to be exercised if the stock price is above the strike price. And if the stock price is below the strike price, it is unusual for holder to decide not to exercise. But there is no guaranteed outcome for the party that sold the put.
There are many reasons for these anomolous outcomes. Changes in the price of the stock during after-hours trading is one possibility. There are others. Most brokers have an "automatic exercise" policy. But if the party holding the put option does not own the stock, then exercising the put will result in a short sale.
It is is possible to buy a put option, without owning the stock, in a brokerage account that is not approved to sell stock short, or in an account that does not have enough equity to support selling short 100 shares of that stock.
If the stock price is below the strike price at expiration, and the holder does not own the stock and is not permitted to sell the stock short, then...
... in the name of all that is holy, the holder of the put should sell the put.
But if they don't do that, the broker is not obligated to perform an automatic exercise if the account cannot sell the stock short. If the holder takes no action and the broker takes no action, the put will expire worthless and will not be exercised.
I strongly recommend that you stop using the expressions sell put and sell call as noun phrases. That is not how options traders talk about these trades and people are not going to understand you.
Sell is a verb. Use it that way.
Don't say: I did a sell put.
Do say: I sold a put. Or: I am short one Feb 9 35 put.
Don't say: I did a sell call.
Do say: I sold a covered call. Or I wrote a covered call. (Both of which mean that you sold a call while holding the stock.)
Or: I am long the stock and short the Feb 9 35 call.