All I was pointing out is that the holding a DITM short call has
somewhat different ramifications than a DITM short put. The biggest
difference is that because you may have a broker that takes rules
against naked shorting rules for stocks seriously, after exercise the
resulting short stock may have to be liquidated at any time, This has
nothing to do with whether or not that short stock is part of a
synthetic short put. By the way, with respect to the 165 short put,
since it has very little time value, buying it back now will have
almost no effect on the total P/L expiration graph. I've tried itt.
On Mon, 17 May 2010 05:09:40 -0000, "Karen"
<mcatolico@mindspring.com>u wrote:
>again you have to understand synthetics. if i am short the call, that is the exact same position as short stock and short a put. if i am short a call and i get exercised and the put still has intrinsic value i will immediately act to sell that put.
>
>all the other aspects of the trade are irrelevant: margin, price of the underlying, and so forth. if you are naked short a call you have all these things to contend with just the same as you would if you started with the synthetic (short stock and short put).
>
>i get exercised all the time. it doesn't matter in the least. i don't trade from a retail account but all the same, if you are not covering your margin in a retail account then you won't be allowed to sell options short, right? why would exercise change your margin requirements? (maybe i'm missing something?)
>
>--- In OptionClub@yahoogroups.com, Ricky Jimenez <rickyjim@...> wrote:
>>
>> 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@...> 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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