When the option you wrote is called away early..

HawaiianIceberg

HawaiianIceberg

I write covered calls and noticed that if they're called away early, it's almost always at the peak in price, before a drop happens.

Just wondering if others see this often and am interested in knowing if anyone uses these as signals to go in the opposite direction.
 
HawaiianIceberg said:
I write covered calls and noticed that if they're called away early, it's almost always at the peak in price, before a drop happens.

Just wondering if others see this often and am interested in knowing if anyone uses these as signals to go in the opposite direction.
More...

that's a very interesting observation, thank you for having shared this.
 
I don't see this often.
I think its illegal, as you can only exercise at expiry, and suboptimal, because you would get more money by selling the option.
What do you think of a playing card which says on one side, 'the statement on the otherside of this card is true' and on the other 'the statement on the otherside of this card is false'?
 
isabellavillareal said:
I don't see this often.
I think its illegal, as you can only exercise at expiry, and suboptimal, because you would get more money by selling the option.
What do you think of a playing card which says on one side, 'the statement on the otherside of this card is true' and on the other 'the statement on the otherside of this card is false'?
More...

It can be exercised at anytime during the option period...Including the next day (Saturday) depending on the exchange, and at any price!! Many times an option will be exercised before the ex dividend of the stock. So the buyer of the option will gain both the upside they gained and the dividend they will be entitled to...

This is why it can be so dangerous to be uncovered (naked) in your position. The stock you own could have dropped over 50% the last few months...You sell the underlying position (if your broker will allow it). Amazon/Facebook/Apple decides to buy the company for 150% of the price of the company. You are in deep do do if you are uncovered.

One example you could look at is CAR...Avis, during the pandemic. Look at the last two years of what the company did. They had to buy new cars when no one was driving. They ended up with a ton of used cars that people needed (chip shortage).

One last thought...Never be uncovered over night or over a weekend. Bad karma!!
 
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Other than a Div play,why would anyone exercise a call early???

HawaiianIceberg said:
I write covered calls and noticed that if they're called away early, it's almost always at the peak in price, before a drop happens.

Just wondering if others see this often and am interested in knowing if anyone uses these as signals to go in the opposite direction.
More...
 
I should have added if there is a wide bid offer on the deep ITM and,you want out,selling stock and exercising may be the most efficient way of getting out...
 
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