Why did I not get an assignment notice?

[noob_trad3r]

Quote from RobtF:

You bot GE at a multi year bottom and then you sold calls 4 days before expiry under the current price? Why? You lucked out twice when they they closed .14 OTM. You'll get get to sell them again. Are you doing any tax planning - you'll have a large capital gain. Did you mean to protect your gain? you should have sold calls DITM or BOT puts.

The low was actually somewhere in the 5 range I believe. I sold the 13 because all all the targets from what I read for ge was in the 13's so I wrote the 13 call and figure I could buy it back cheaper but things went in a much better place and ended up out of the money, I thought GE might go down to 13's but it went down under.

At least my gains for this will be lower than if I had sold for 14 and had to pay much more taxes instead. Although I am thinking of holding off on writing calls for next month, If I do I will do it out of the money instead. But I might just hold off because I do not want this tax hit.

With the premium I am thinking to hold on to it and if GE goes under 12 maybe using it to buy more. I will take my time next week to figure this out.

The tax stuff is going to be a bit of a pickle since I have a regular job and now I might have to pay more taxes, I am working out to see how much I need to save aside for taxes. Unfortunately this is on a regular taxable account since I do not qualify for the roth IRA.

 

[noob_trad3r]

Quote from dagnyt:

There is no way to know whether one person bought all 75 of your calls, or if 5 traders took 15 each, or any of the many other possibilities.

There is also now way to know if the call buyer hedged. The most likely hedge would have been to short stock at that 14+ price, on a delta neutral basis. That would have been about 6500 shares, depending on the option delta at the time of the trade.

It's just one of those things that cannot be known. You use your options for your purposes and the guy/gal on the other side does the same.

BTW the price you paid for GE is irrelevant to this discussion. I hope you understand that point. I am not trying to say anything negative here - just want you to understand what you are doing, and how options work.

Mark

Thanks for the details. I am interested in how all this works. I am reading more on the subject to learn more. There is much to learn on the options side.

I heard that assignment requests only get processed after the market closes? Now this means after hours you run the risk of assignment if the stock jumps 10 cents and is in the money correct? Thanks for your insight.

 

[dagnyt]

Quote from noob_trad3r:

Thanks for the details. I am interested in how all this works. I am reading more on the subject to learn more. There is much to learn on the options side.

I heard that assignment requests only get processed after the market closes? Now this means after hours you run the risk of assignment if the stock jumps 10 cents and is in the money correct? Thanks for your insight.

I get it. You want to learn more.

Here's all you NEED to know. You can learn as much other stuff as you prefer to learn.

If you are short an option when the market closes for the day, it's possible that you will be assigned an exercise notice.

If you are short an option and buy it back one day, there is no longer any possibility of being assigned.

Yes, the exercise process occur overnight, well after the markets close.

Yes, if the stock trades after hours on expiration Friday and if it jumps into the money, there is the possibility that the option owner will learn of the higher price (individual investors are unlikely to know and market makers are very likely to know), Then they can exercise the expiring options. But there is a cutoff time and they cannot take forever to exercise.

If it's not expiration Friday, there would be no reason to exercise. I still believe you don't grasp the idea that it is STUPID (IGNORANT,IMBECILIC, AND OTHERWISE INCORRECT) for a call owner to exercise an option prior to expiration - except under special situations when a dividend is involved. So if you are assigned prior to expiration it's a gift.

To read more on this:
http://blog.mdwoptions.com/options_for_rookies/2008/11/exercising-an-option-is-it-a-good-idea.html

Mark

 

[RobtF]

Quote from noob_trad3r:

The low was actually somewhere in the 5 range I believe. I sold the 13 because all all the targets from what I read for ge was in the 13's so I wrote the 13 call and figure I could buy it back cheaper but things went in a much better place and ended up out of the money, I thought GE might go down to 13's but it went down under.

At least my gains for this will be lower than if I had sold for 14 and had to pay much more taxes instead. Although I am thinking of holding off on writing calls for next month, If I do I will do it out of the money instead. But I might just hold off because I do not want this tax hit.

With the premium I am thinking to hold on to it and if GE goes under 12 maybe using it to buy more. I will take my time next week to figure this out.

The tax stuff is going to be a bit of a pickle since I have a regular job and now I might have to pay more taxes, I am working out to see how much I need to save aside for taxes. Unfortunately this is on a regular taxable account since I do not qualify for the roth IRA.

Don't worry, you're in an enviable position. Selling more calls, although it will increase your taxes at this point, will still incrementally increase your wealth (unless it puts you into a higher bracket, hah). Why sell or have it assigned from you at all? Hold onto it for a Long Term capital gain - just protect your position by buying puts as insurance against a steep decline.

 

[dagnyt]

Quote from RobtF:

although it will increase your taxes at this point, will still incrementally increase your wealth (

1) It cannot increase his taxes unless it increases his wealth. Taxes are never more than 100% of the profits.

2) It does not increase his taxes in a bad way. Every time he writes a new covered call he is likely to earn more money. If earning money is a problem for you because you pay a portion of that income in taxes, that's your problem and not his.

I wish I could pay 10 billion dollars in come taxes this year, but it's not likely,

Mark

 

[SForce]

Quote from gody3:
Does you broker not have smart routing to the best priced exchange?

Quote from xflat2186:

First of all as a retail investor you get the NBBO so it’s irrelevant which exchange it goes to and odds are your retail order goes to the place where your broker gets the best kickback for sending orders assuming its still NBBO.

It never matters who does the other side of the trade. For example if you sold 50 contracts opening and the MM or customer who bought them then immediately exercises those his exercise goes into the pool of all the people who are short that option and they get assigned randomly. Just because the person who bought yours exercised them never means he’s the only one to assign you.

Did you read what I wrote or just see two words and reply? .. If I'm setting a limit order at the bid for something that the bid/ask is staying pretty solid - NBBO doesn't mean a thing. Hell, if I set a limit order at all then NBBO doesn't matter because the limit is what I'm going to pay on an option.

Secondly, that part where you explained it doesn't matter who I sold the 50 contracts to because it's assigned randomly is exactly what I said.

 

[RobtF]

Quote from dagnyt:

1) It cannot increase his taxes unless it increases his wealth. Taxes are never more than 100% of the profits.

2) It does not increase his taxes in a bad way. Every time he writes a new covered call he is likely to earn more money. If earning money is a problem for you because you pay a portion of that income in taxes, that's your problem and not his.

I wish I could pay 10 billion dollars in come taxes this year, but it's not likely,

Mark

Why don't you address his concerns instead of mis-reading my syntax?

 

[dagnyt]

Quote from RobtF:

Why don't you address his concerns instead of mis-reading my syntax?

I provided the OP with a clear, concise, accurate reply.

Here's your reply:

"Don't worry, you're in an enviable position. Selling more calls, although it will increase your taxes at this point, will still incrementally increase your wealth (unless it puts you into a higher bracket, hah). Why sell or have it assigned from you at all? Hold onto it for a Long Term capital gain - just protect your position by buying puts as insurance against a steep decline.'


1) You suggested to someone who enjoys the benefits of collecting premium that it's a good idea to buy puts. That does nothing to address his concerns.

Some people like the idea of very limited insurance and collecting premium vs excellent insurance and paying premium.

Holding for a LT capital gain is of minor benefit when your money is tied up for many months. In addition, the cost of paying for all those puts is going to more than negate any potential tax benefit. Puts are expensive.

In my opinion, trading to save on taxes is a very unsophisticated, unintelligent method of investing. Make your money and pay your taxes, What's so difficult about that?

2) You did say that selling more calls will increase his taxes. Exactly how did I not interpret that correctly?

Mark

 

[TraderSU]

Quote from dagnyt:

BTW the price you paid for GE is irrelevant to this discussion. I hope you understand that point. I am not trying to say anything negative here - just want you to understand what you are doing, and how options work.

Mark

FYI - I'm a newbie so please correct me if my understanding is not right.

Assuming GE was trading at 14.20 at the time of CCW (covered call writing) i.e. May 11; here are possible outcomes for his CCW.

* GE trading above 14.26 - he is at loss - delta 1
* GE trading between 13 and 14.26 - he is at 6 cents profit
* GE trading between 12.94 and 13 - he is at 0 - 6 cents profit
* GE trading below 12.94 - he is at loss - delta 1

So the problem here was that he went through all these hassles for only 6 cents of advantage (or what ever was the time premium at that time).

It would be a great lesson if someone can please explain me the best thing to do in these type of situations.

- SU

 

[spindr0]

Quote from noob_trad3r:

At least my gains for this will be lower than if I had sold for 14 and had to pay much more taxes instead. Although I am thinking of holding off on writing calls for next month, If I do I will do it out of the money instead. But I might just hold off because I do not want this tax hit.

The tax stuff is going to be a bit of a pickle since I have a regular job and now I might have to pay more taxes, I am working out to see how much I need to save aside for taxes. Unfortunately this is on a regular taxable account since I do not qualify for the roth IRA.

LOL. I hate to break the news to you but the more taxes you have to pay each year on capital gains, the better it is for you.