SPY dividends. Practical advice needed

M

maxima120

If my spreads will result in short position in SPY on this weekend expiration. How do I estimate when is good idea to close the options position before expiration and when is to wait for expiration.

Need kinda rule of thumb so I dont have to think long about it.

All the spreads are puts.

.............
in theory I'd say if my long put strike is 100 and dividend is 0.65 then I should trade out the option position if I think it will expire with price < (100 + 0.65).

will it do ?
 
Quote from maxima120:

If my spreads will result in short position in SPY on this weekend expiration. How do I estimate when is good idea to close the options position before expiration and when is to wait for expiration.

Need kinda rule of thumb so I dont have to think long about it.

All the spreads are puts.

.............
in theory I'd say if my long put strike is 100 and dividend is 0.65 then I should trade out the option position if I think it will expire with price < (100 + 0.65).

will it do ?
More...
The dividends are priced into the options. You don't have to do anything.
 
This is what my borker said yesterday:
--
SPY is having a 0.6526 dividend paid so you may want to review all positions that may end up being assigned and close those that may assign short shares to the account overnight. Otherwise your account would be liable to pay those dividends if the account has short shares of SPY.
--

is he saying - we might excercise for you long puts and you get short position in SPY this weekend.. is this right? is it bad?

regarding divs priced in options - I know that. but imagine I got short position indeed and SP500 jumps on Sunday night - Monday morning and SPY opens +20... This is market risk which will not be covered by any options pricing the divs in because they have expired... right?
 
Quote from maxima120:

This is what my borker said yesterday:
--
SPY is having a 0.6526 dividend paid so you may want to review all positions that may end up being assigned and close those that may assign short shares to the account overnight. Otherwise your account would be liable to pay those dividends if the account has short shares of SPY.
--

is he saying - we might excercise for you long puts and you get short position in SPY this weekend.. is this right? is it bad?

regarding divs priced in options - I know that. but imagine I got short position indeed and SP500 jumps on Sunday night - Monday morning and SPY opens +20... This is market risk which will not be covered by any options pricing the divs in because they have expired... right?
More...

Exercising long puts is not assignment.

What assigns in to short shares? Short calls.

Only those with short ITM calls (part of spreads or not) need be concerned.

Since today was ex-div. the calls would have been exercised yesterday and the short shares would have shown up today.
 
It was the broker who said assignment. I think he meant that if their risk dept will choose to exercise my long puts these will make me to pay divs.... otherwise his words doesn't make sense...

P.s. still see options on the account. No shares. It is too early in US
 
Quote from maxima120:

It was the broker who said assignment. I think he meant that if their risk dept will choose to exercise my long puts these will make me to pay divs.... otherwise his words doesn't make sense...

P.s. still see options on the account. No shares. It is too early in US
More...

His words were intended for those with short calls, not you.
 
If you hold long ITM puts into expiration they will be exercised and you will sell shares out of your account. If you don't own any shares you will be short and liable for paying the divvy.

I'm not sure of the timing though. Technically the expiration/exercise happens on Saturday and as was pointed out that should be after ex-div date. Your short position shouldn't hit your account until Monday.
 
yeah. that what I thought too. but why would boker talk about divs.. I am sure he knows dates of exercise and ex-divs etc.

the conversation happened this thursday. not year ago. and was concerned the positions which were going to expire today....

we will see later.
 
You must log in or register to reply here.
Back
Top