You can always short the stock and have a free put option.
Offset a short squeeze (borrow is essentially a dividend).
I’ll make it simple for you as you clearly know nothing about options
.
When the option you wrote is called away early..
- Thread starter HawaiianIceberg
- Start date
You can always short the stock and have a free put option.
Offset a short squeeze (borrow is essentially a dividend).
I’ll make it simple for you as you clearly know nothing about options
.Cheap shot
There was zero chance I was introducing the revolutionary free put concept..
There was zero chance I was introducing the revolutionary free put concept..
You can always short the stock and have a free put option.
Offset a short squeeze (borrow is essentially a dividend).
I’ll make it simple for you as you clearly know nothing about options
You can always short the stock and have a free put option.
Offset a short squeeze (borrow is essentially a dividend).
I’ll make it simple for you as you clearly know nothing about options
Let's start over...He was talking about covered calls. I heard nothing about spreads...
you should reread the thread.
And then retract some of your posts. That would be starting over.
Cheap shot
There was zero chance I was introducing the revolutionary free put concept..
I was thinking of a time that your former employer was planning to do a rights issue and the borrow of their stock was higher than the stock price. People were exercising calls left and right to get stock to cover their shorts.
Yeah, I was wrong...Partly. The first post was correct (they may not be common, but it is correct) on when an option can be exercise and time period. The post is correct on why they (hedge funds/mutual funds/investors) exercise options early. People should know about being uncovered (naked)...If they don't, they should...Common sense (except if you are at Robinhood trying to exercise your options on Gamestop)!! The third one was correct also...Options can be exercised at anytime (no matter the stock price). They won't be, because of no profit involved.
Here is where I was wrong. I went down a rabbit hole when we got sidetracked with things like exercising. I also didn't read closely the second part of the question. I'll try and give a congruent answer...accept it or not.
"Just wondering if others see this often and am interested in knowing if anyone uses these as signals to go in the opposite direction."
The first part...Yes, many options get exercise early. The second part...By owning a covered call bye itself, you are admitting you are not doing a straddle of any kind. By just selling the covered call (sell to open)...Without holding another option position in the stock, there are only a few ways to profit from the transaction. The problem is the option can be exercised at anytime (including after hours).
Buy a put at 20% below the current high price...But it carries potential losses with it.
Or, as the stock rises...Just buy back your option, if you feel it will make a bigger run (buy to close)...You keep the dividend and you keep the future profit you hope to gain.
Both of the above can turn out bad. I have done covered calls for over 25 years. I look for/between a 6%-30% annual return on my money...Most average around 10%. I will let others profit greatly from my covered calls. But, I also enjoy my stocks (covered calls) rising and not getting called away...Expiring out of the money. I just laugh, then write another covered call if I choose to...
PS...One last though, are you selling your calls to cheaply?? Should you consider way out the money calls...Even leaps that are way out of the money?? I have changed my investing strategy on how I write them. I am doing more of the above...Dividend producing companies (think Coke KO, ADM), with leaps, way out of the money.
PSS...You might also want to read this. I've done it before with covered calls (think Exxon). It has worked out OK for me. https://www.investopedia.com/terms/d/diagonalspread.asp
Here is where I was wrong. I went down a rabbit hole when we got sidetracked with things like exercising. I also didn't read closely the second part of the question. I'll try and give a congruent answer...accept it or not.
"Just wondering if others see this often and am interested in knowing if anyone uses these as signals to go in the opposite direction."
The first part...Yes, many options get exercise early. The second part...By owning a covered call bye itself, you are admitting you are not doing a straddle of any kind. By just selling the covered call (sell to open)...Without holding another option position in the stock, there are only a few ways to profit from the transaction. The problem is the option can be exercised at anytime (including after hours).
Buy a put at 20% below the current high price...But it carries potential losses with it.
Or, as the stock rises...Just buy back your option, if you feel it will make a bigger run (buy to close)...You keep the dividend and you keep the future profit you hope to gain.
Both of the above can turn out bad. I have done covered calls for over 25 years. I look for/between a 6%-30% annual return on my money...Most average around 10%. I will let others profit greatly from my covered calls. But, I also enjoy my stocks (covered calls) rising and not getting called away...Expiring out of the money. I just laugh, then write another covered call if I choose to...
PS...One last though, are you selling your calls to cheaply?? Should you consider way out the money calls...Even leaps that are way out of the money?? I have changed my investing strategy on how I write them. I am doing more of the above...Dividend producing companies (think Coke KO, ADM), with leaps, way out of the money.
PSS...You might also want to read this. I've done it before with covered calls (think Exxon). It has worked out OK for me. https://www.investopedia.com/terms/d/diagonalspread.asp
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Pardon the intrusion, folks, but when you say the option is exercised early, how early are you talking about? Couple of days before expiration? 2 weeks?
If my short option goes ITM (slightly), with 2 to 3 weeks left to go, is there really much risk of early assignment?
If my short option goes ITM (slightly), with 2 to 3 weeks left to go, is there really much risk of early assignment?
ANYTIME!! It is not likely out of the money, but it could happen. There is a rumor that you company is in talks with Amazon/Google/Apple. The buyer of your option is still out of the money...They have the right to exercise the stock option AT ANYTIME. One in a billion...But could happen.