Will I be assigned?

[heech]

Quote from dagnyt:

You are mistaken.

He has 33,000 from the sale of the stock.

he is allowed to use that cash to repurchase the shares sold short.

Mark

Exactly, people are giving OP wrong advice... probably giving the poor guy a heart attack.

You can sleep reasonably well this weekend. Your margin requirement for the naked call would have already been roughly equivalent to the margin requirement for covering the naked call*... IB isn't stupid. If you weren't liquidated Friday afternoon, you won't be liquidated Monday morning.

Yes, you are exposed to GOOG gapping up. So what? Anyone who's holding GOOG long this weekend is exposed to GOOG gapping down. Put it in perspective.

(*Note, the option could've been exercised at any point last week when GOOG was trading over 330.)

 

[shazam75]

So one of two things will happen?

1. I get assigned and see -100 stock on GOOGLE come Monday

OR

2. I don't see -100 stock on GOOGLE come Monday

If I see option 1, then I will, at pre-market, buy 100 shares of GOOG to close out the position and taking any loss.

Cheers!

 

[spindr0]

Quote from heech:

Exactly, people are giving OP wrong advice... probably giving the poor guy a heart attack.

You can sleep reasonably well this weekend. Your margin requirement for the naked call would have already been roughly equivalent to the margin requirement for covering the naked call*... IB isn't stupid. If you weren't liquidated Friday afternoon, you won't be liquidated Monday morning.

Yes, you are exposed to GOOG gapping up. So what? Anyone who's holding GOOG long this weekend is exposed to GOOG gapping down. Put it in perspective.

While the OP may be able to sleep this weekend, as noted by many, the risk is that GOOG goes up Monday morning before the short can be covered and that risk was not his intention. Therefore, "So what?" won't be very soothing to his ears.

The other possible risk is that IB restricts his account for a margin violation. I say possibile since I don't know how many violations it takes to trigger that penalty.

 

[jwcapital]

The folks here are generally correct. First, no broker will allow you to maintain a naked option without adequate margin--which, BTW, should be enough to be short GOOG come Monday. Also, the folks are right in that you should have closed out this trade before the close on Friday. Now, the best thing would be to close out the option--but you will end up paying too much. I would simply buy the 100 sh. of GOOG before the close to cover. I had this happen to me once. I was short puts on the ES during a serial period (meaning that all options expiring ITM will be assigned a long or short position in the underlying. During a quarterly period, all ITM options are settled in cash based on the SOQ (special opening quote). Anyway, on the Friday of expiration, the ES was closing in on my short strike. Like a fool, I allowed the short put to expire slightly ITM. Well, I got lucky. The ES opened up on Monday AM (I don't trade on Sundays--the ES begins trading on sundays at 6PM EST). So, I simply sold the futures put to me. Like most here said, better to just get out of the ITM option BEFORE the close on expiration Friday.

 

[spindr0]

Quote from shazam75:

If I see option 1 (I get assigned and see -100 stock on GOOGLE come Monday), then I will, at pre-market, buy 100 shares of GOOG to close out the position and taking any loss.

IB's expiration statement is usually available on Sunday. If you see 100 short GOOG, you need to get on top of it immediately.

Because I've been with IB for a long time, I don't remember if I had to request pre market trading approval. That may be one issue you have to contend with if you have never traded in pre and post market hours. Assuming that you don't need specific approval to do that, you should get up bright and early Monday to monitor your position.

If you do need approval and you don't have it, you may be in a bind since 1) you won't be able to cover before regular hours trading opens and 2) their customer service doesn't open until 9 AM and approval won't be forthcoming in time. I'd send them an E-mail on Sunday but I question how far that will get you. Even so, do it even if there's a slim chance that it will get you anywhere.

Breaking news stocks as well as the most frequently traded stocks (AAPL, GOOG, AMZN, etc.) often trade in the pre-pre market prior to 8 AM EST (the pre-market is considered to be 8 to 9:30 AM EST). Watch out for Holland Tunnel wide bid/ask spreads, particularly in the pre-pre. You can split the B/A and work the order as long as GOOG isn't running up. If it is rising, you'll have to make the decision as to whether you want to get ripped on the spread and pay through the nose to stop the losses... or not. And with all our warnings, GOOG can also drop Monday morning and there's the potential for a good payoff. So stay on top of it and learn the lesson of pin risk.

Good luck.

 

[spindr0]

Quote from jwcapital:

The folks here are generally correct. First, no broker will allow you to maintain a naked option without adequate margin--which, BTW, should be enough to be short GOOG come Monday. Also, the folks are right in that you should have closed out this trade before the close on Friday. Now, the best thing would be to close out the option--but you will end up paying too much. I would simply buy the 100 sh. of GOOG before the close to cover.

There are several problems with this. The margin on a naked option is approximately 20% (depends how OTM the option is) whereas for the stock, it's 50%. So it's possible to be in a position where your account can support an option position but not the stock position. If that's the case, one could not buy the stock before the close on Friday since the margin would not be available. And even it it was, this is a pin risk issue so buying 100 shares before the close could create the same problem he has now but in the opposite direction (if the call wasn't auto assigned).

No matter how you cut it, the only way to avoid the mess is to close the option on Friday, regardless of the spread.

 

[dagnyt]

Quote from spindr0:



No matter how you cut it, the only way to avoid the mess is to close the option on Friday, regardless of the spread.

That says it all.

Don't forget, OP did miss covering by just a second or two.

Mark

 

[heech]

Quote from spindr0:

There are several problems with this. The margin on a naked option is approximately 20% (depends how OTM the option is) whereas for the stock, it's 50%.

Well, right, but we're only having this conversation because the option was ATM (and ITM for much of the week). Margin isn't really an issue.

I agree the OP didn't really mean to sign up for this risk, and should've closed out his position on Friday. At the same time, this risk isn't any different than the risk he had Thursday night, Wednesday night, Tuesday night, etc. GOOG could've gapped up to 360 last Friday morning, and it would been identical (financially) to it gapping up to 360 next Monday.

I had some naked calls on MS end up ITM Friday, and I also didn't close before session ended. All of these thoughts ran through my head as well. I ultimately decided to cover after-market, but really could've gone the other way.

 

[dagnyt]

Quote from heech:

At the same time, this risk isn't any different than the risk he had Thursday night, Wednesday night, Tuesday night, etc.

Except for a margin problem, he has MUCH less risk.

He has the same loss possibility, but now has a profit potential that was not available earlier. I'm not suggesting allowing himself to be assigned was a smart move (he knows it wasn't), but he's better off now than he was Thurs night.

Mark

 

[heech]

Quote from dagnyt:

Except for a margin problem, he has MUCH less risk.

He has the same loss possibility, but now has a profit potential that was not available earlier. I'm not suggesting allowing himself to be assigned was a smart move (he knows it wasn't), but he's better off now than he was Thurs night.

Mark

You're completely right. A gap down to 200 Friday morning would've only made him pennies, whereas a gap down to 200 Monday morning will make him benjamins.