This works well when your short put is assigned. I am not so sure
about short calls. Have you had the experience of your broker
insisting you cover a short stock position, pronto or doing it for you
when you are on a break? Certainly that messes up plans for your
synthetic short call. I guess if you buy back the short put at
exactly the same time the stock is covered, you won't add to the risk.
On Sat, 15 May 2010 03:45:55 -0000, "Karen"
<mcatolico@mindspring.com> wrote:
>as murthy pointed out, i meant extrinsic (instead of intrinsic) premium.
>
>how would i handle assignment here? i would simply sell the call and create the same synthetic short put position - with the additional credit of the short call's value.
>
>assignment has nothing to do with deltas. the deltas wouldn't change in the slightest. short a deep in the money put means that i am long 100 deltas. if i get assigned the long stock i would have the same long 100 deltas. selling the call against the stock simply converts the long stock back into the original short put that someone was silly enough to assign to me (and thereby give me another $0.05 for free).
>
>--- In OptionClub@yahoogroups.com, "Ricky" <rickyjim@...> wrote:
>>
>>
>> Since this is a paper trade, assignment won't happen before expiration. However it would be helpful to us if you said a few words on how you would handle the long or short stock that has come involuntarily into your position. Would you immediately liquidate all or maybe just enough to get delta neutral, if possible, or what?
>>
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