[TheOptionClub.com] Re: how do I adjust options so they don't get exercised?

 

Assuming your short call is ITM and you want to retain the underlying, I watch the extrinsic value and the ExDiv date.

If the ExDiv date is within your option expiration cycle and the extrinsic value is near or less than the dividend, roll out or roll up/out to the next month.

If the extrinsic value is equal to or less than the difference between the strike and the underlying price, roll out or roll out/up to the next month.

Worst case, the person holding your call will only exercise when they can get a deal on the price of the stock. At that point you could be called.

FYI - not everyone who buys options intends or even wants to own the underlying.

Jeff W

--- In OptionClub@yahoogroups.com, "nahorowitz" <nhorowitz@...> wrote:
>
> Paul, as Chris mentioned, the sure-fire way is to close the position. But that being said, when you hold short options and the guy on the other side has the long side, if he exercises early, then he loses his entire premium, so there is no incentive to exercise early--it is a rare event for this economic reason. So if it happens to you 1 out of 100 times, just take your hit and move-on. It is a rare event. Maybe others on this group could give some anecdotal examples of how infrequently early exercise occurs.
>
> Also, only American style options can be exercised early. European style options cannot be exercised until expiration day. Some of the options traded on CBOE are European style. You can go to the OIC website: www.optionseducation.org and they have an entire list of all options and american vs european style. Look for "Directory of Listed Options XLS" in lower-right corner under "Key Links". That is an Excel spreadsheet of ALL option contracts in existence. Look for "Euro" in the name and those are the European style options. For example, the XEO, which is the SP100 Quarterly European style contract. Or talk to your broker who can help you. ThinkOrSwim is the BEST broker out there for options trading, and OC members get special $1.25/contract commission if you ask them for it.
>
> Sorry for some of the terse responses. Some of the other members don't handle elementary questions very tactfully.
>

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