These are index options. I learn by doing, so I trade live, just very tiny position sizes, so that I can understand what is happening in the live market. I had no plan for getting assigned on the short options, I only had plan to manage the portfolio by keeping delta neutral, which has indeed happened so far.
Mike
P.S. I just trade with TOS regular commission schedule, for the reason mentioned below.
From: TheOptionClub <chris@theoptionclub
To: OptionClub@yahoogro
Sent: Thu, January 28, 2010 10:12:16 PM
Subject: [TheOptionClub.
Mike,
Well, what did you plan to do if they were assigned? If they are short
equity calls you'll have to sell stock to the long call holder. If
they're short equity puts you'll have to buy equities from the long put
holder. If they are cash index options, the whole thing will be worked
out in cash without your input.
You need to know this BEFORE the trade is opened and have a plan to deal
with it should it occur. You're assigned on a short equity call? Maybe
you exercise your long call. Or, maybe you buy stock at market to sell
at the short call strike. It would be nice to have a plan in place.
Maybe you sold calls against a long stock position and that stock just
gets called away. Maybe it's an early exercise and there is still good
time value to be sold so you cover the stock and sell another call.
Lot's of possibilities. It would be a good idea to think through them
and have a plan in place ahead of time.
Rookie traders never do have a plan to cover such possibilities,
however. That's why it's totally worth 50 cents to be able to pick up
the phone and hit the auto0-dial button for your broker's trade desk and
say "oh crap, I just saw that I was assigned.. What can I do?" and have
them explain it all to you.
Or you can go with the .75 per contract commissions and figure it out on
your own. That's when we get the forum post...."I was just assigned on
a short option and I have no idea what this means so I was hoping
someone here can explain it to me and tell me what to do because I think
I may have lost a lot of money and if so what should I do to adjust this
position so I can make a profit?" Of course, we'll try to help but this
is the Internet and we may get back to you right away or maybe we get
back to you later. Me? Charge me extra cause I want that 800 number,
baby.
I'm not trying to be a smart ass. I am trying to make a point. If
you're ready to sail the seven seas on your own then go out there and
demand the cheapest commissions and best executions you can reasonably
expect. But, if you're still a a bit of a land lubber and want someone
there to point you in the right direction recognize the value in having
ready access to someone with knowledge. Brokers are part of your
trading business. With a bit of diligence you get what you pay for.
Just trying to make my point about brokers and commission costs...
As for your positions, you should do exactly liked you planned before
the trades were opened. If they are assigned, you must deliver stock
for any short calls and accept stock for any short puts. If they are
index options they will be settled in cash. There are no tricks. You
made a deal and the OCC will see that you and your broker abide by it.
Christopher Smith
TheOptionClub. com
--- In OptionClub@yahoogro ups.com, Mike Cleveland <mikeandjody1996@ ...>
wrote:
>
> This is excellent, thank you for your help on this.
>
> I'm new, so I have a question. You say " They're scared and unsure
about what happens if they're assigned on a short option."
>
> I have a number of Iron Condors and Vertical short vertical spreads
expiring in February. So far the "position portfolio" is dead center,
but there are a number of individual trades that are in the money on the
short contract. So what do I do if they are assigned?
>
> I'm just trying to get ahead of it happening.
>
> Thank you.
>
> Mike
To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
No comments:
Post a Comment