What aren't all options cash settled?

[mervyn]

You are not always losing money when assigned. You can be assigned or manually excercise any itm long and be positive.

I like to trade cash settled, but with xsp you are leaving a big chunk % between spread and commission. SPX rules.

you can only excerise up to your all margins combined, otherwise no. leverage is not a magic wand.

 

[cesfx]

Just sold a weekly 4715/4720 call.

Hey on late Friday, do market makers factor in theta decay over the weekend so you are basically paying/receiving the same premium as you would on Monday? Or do you get the benefit of the weekend theta decay in return for the risk? If so then Whoo hoo! because I prefer hold positions after close when all the fun happens so this would make it even better.

I think it's complicated, there is some theta decay but it's smoothed by volatility, so the weekend feels like if it is priced in.

 

[cesfx]

you can only excerise up to your all margins combined, otherwise no. leverage is not a magic wand.

Sure, but margin permitting, one can be assigned a long/short in profit, on expiration of a long itm.

I think early assignments it's a risk for losing trades only, because that would be a short option with the buyer exercising early.

 

[newwurldmn]

Sure, but margin permitting, one can be assigned a long/short in profit, on expiration of a long itm.

I think early assignments it's a risk for losing trades only, because that would be a short option with the buyer exercising early.

early exercising is a defensive move for long holders:
it's to avoid losses either in dividends, borrow, or carry.

 

[cesfx]

early exercising is a defensive move for long holders:
it's to avoid losses either in dividends, borrow, or carry.

I didn't mean to say that sellers are doing the early excercise, but receiving it with a loss when buyer does it.

As a continuation to a reply to this:

well what's the logic. when you are assigned, you are pretty much losing money, that's why the counterparties assign to you. if you are lucky to have enough cash, it makes no difference.

 

[mervyn]

I didn't mean to say that sellers are doing the early excercise, but receiving it with a loss when buyer does it.

As a continuation to a reply to this:

In the assignment, you are the seller. You don’t control if and when. I got early assignment from time to time when there was a bad news and underlying drops, from 2 weeks to 2 months ahead of expiration.

 

[newwurldmn]

I didn't mean to say that sellers are doing the early excercise, but receiving it with a loss when buyer does it.

As a continuation to a reply to this:

This is wrong. Buyers exercise in order to avoid a loss. Sellers can only gain by a buyers mistake.

 

[TheDawn]

A spread isn't shorting options naked...except for the scenario I put out where the price finishes between your strikes.

The difference is Cash-settled options are defined risk trades...you can only ever lose the difference in spread minus the premium received.

Non-cash settled options are not defined risk because of the risk of assignment.

The underlying's price finishing between the strikes would impact the spread the same whether it's cash-settled or settlement with physical delivery provided that the trades to close the physically delivered assets happen at the same time then it would be no different whether it's cash-settled or physically settled or not.

Like I said, physical delivery of assets is needed for options on physical assets that cannot be all resolved by just cash settlement. Whatever risks that come with trading options with physical delivery would need to be managed by the trader. That's part of the challenge of trading options.

 

[cesfx]

My bad.
I mixed up assignment and excercise roles.

 

[wxytrader]

The underlying's price finishing between the strikes would impact the spread the same whether it's cash-settled or settlement with physical delivery provided that the trades to close the physically delivered assets happen at the same time then it would be no different whether it's cash-settled or physically settled or not.

Like I said, physical delivery of assets is needed for options on physical assets that cannot be all resolved by just cash settlement. Whatever risks that come with trading options with physical delivery would need to be managed by the trader. That's part of the challenge of trading options.

It's completely different if you read my first post. In cash settled you can only lose the difference. In non cash settled you can get assigned un-protected and get in a world of hurt premarket before you get a chance to liquidate your margin call. It's not a "part of the challenge" of trading options lol...you make it sound like it takes some sort of skill not to get wrecked...its like owning a dog that bites and telling everyone oh well, he's just being a dog.

Also, you mention it must be managed by the trader? Yeah you are forced to close prematurely, or take some other action to avoid or hedge the impending assignment and margin call. That's not managing..that's panic selling.