Vertical Spread Assignment

[FXforex]

Do you even trade options?

Thats just not true at all. You can goto assignment. Thats how you close out of a spread position and profit on the equities trades. All the options will close out at exactly $0 at expiration after assignment. This is also the topic of the thread as the OP has already told you.

And you sometimes actually do want to spread it for high IV options rather than buying outright. And buying a few strikes up just because it costs less could mean you lose all your money if the stock stays flat or under the strike. All of this is pretty options 101 stuff. I have a feeling you don't trade options.

• You posted a May23 AAPL 595/605 call spread at $443.00. The 595 call can be bought for $6.85 and the 605 call is selling for $2.42. See post #3.
• I think being long the May23 AAPL 600 call is better at $425.00. The 600 call can be bought for $4.25. See post #5.
• On Friday May 23 lets see which position is the winner.

 

[xandman]

If you get assigned the 10 you sold and do not have the cash for it you face liquidation. If the liquidation cost blows your account then your doing something crazy.

It's quite possible you loose option spread/trading approval if you do it more than once.

Note that they provide Risk Viewer that is tied to their risk management. They have outlined at what degree of risk you can take before they may come calling. However, I have managed to bring it up to 8/10 in a concentrated position without getting a call.

 

[butterfacetrader]

• You posted a May23 AAPL 595/605 call spread at $443.00. The 595 call can be bought for $6.85 and the 605 call is selling for $2.42. See post #3.
• I think being long the May23 AAPL 600 call is better at $425.00. The 600 call can be bought for $4.25. See post #5.
• On Friday May 23 lets see which position is the winner.

Again, are you on meds?

I'm talking to the OP in general terms. Then in general terms I picked a common call spread as an example, and said "around $400". Infact, I didnt even state a expiring week that youve just assumed. And then you had to reply "oh its actually $425". LOL. Seriously you sound like you have a stick up ur you know what...

It sounds as though you don't trade options. A lot of people let their winning spreads get exercised to make money on the equities transactions. That is afterall the whole point of the spread.

Your idea was to close the options positions yourself LOL. Its not the only way to play options spreads. Infact, it is the less profitable way at expiration if its a winning trade. The most profitable to squeeze every last penny is to let the option get exercised/assigned.

Finally, and for the last time, that was an example to describe a situation as it relates to limited margin room (which is the point of this thread). It was not a recommendation or options picking. I don't understand why you are getting your panties in a bunch and wana to see whos the bigger man about something so inconsquential and saying 'lets see who wins on that trade' LOL. Seriously, take your meds. The OP has already told you as soon as you replied that you don't understand his questions. Stay on topic.

 

[TskTsk]

What happens if I am assigned on those ten that I sold?

You're screwed.

 

[RichardRimes]

You're screwed.

no your not...... you are allowed to close the position....sell/buy the stock sell/buy the long call...in general, unless there is a gap up or down after expiration you are fine on a spread. However those are waters you don't want to test until you have real experience, also there is NEVER the need to go all the way to expiration with a spread. Just close it.

 

[Brighton]

Recently I've decided to understand derivatives and options trading.

Bonus points for a declarative, confident sentence. Not a "try" or "want to" to be found. Let's hope it does not turn into one of those, "Here, hold my beer and watch this" YouTube moments.

 

[FXforex]

Bonus points for a declarative, confident sentence. Not a "try" or "want to" to be found. Let's hope it does not turn into one of those, "Here, hold my beer and watch this" YouTube moments.

But he gets demerit points for wanting to put all $5000.00 into one debit spread trade. So it will end up as a "Here, hold my beer and watch this" moment.

 

[CrashProof]

If your short leg is assigned before expiration your net account value will go into negative territory.

If you are working a call spread and you are assigned then that means you have sold x# of shares to the other party giving you a net short position on the underlining. Don't panic... You'll probably get a phone call from your broker at about 8 a.m. notifying you of the situation and asking what you plan on doing about it.

This is why we have the other leg as a hedge!!! If the call you went long on is in the money, then you just exercise your long leg. If its OTM then you buy back the underlining at market price for the number of shares you are short. This methodology work whether you or doing a debit or credit spread.

FYI, you'll pay interest on the negative account balance. So its best to not go more than a day without closing out the position.

 

[TskTsk]

no your not...... you are allowed to close the position....sell/buy the stock sell/buy the long call...in general, unless there is a gap up or down after expiration you are fine on a spread. However those are waters you don't want to test until you have real experience, also there is NEVER the need to go all the way to expiration with a spread. Just close it.

If your long hedge expires OTM and you're exercised on your short ITMs, you're left holding much more risk than you had with your option spread, so your margin should increase in proportion to this. Im not sure how brokers handle it but with IB I think you'd be auto liquidated.

 

[FXforex]

If your long hedge expires OTM and you're exercised on your short ITMs, you're left holding much more risk than you had with your option spread, so your margin should increase in proportion to this. Im not sure how brokers handle it but with IB I think you'd be auto liquidated.

The OP is referring to a Debit Spread. His concern about being assingned on his short position is unfounded and he isn't screwed, the position is at or very close to maximum profit. The best thing to do is to close it, problem solved.