Paul,
This isn't really a straddle. It is actually a short iron butterfly.
And, what you have to do depends on your broker. Many brokers today will automatically exercise any option which is a penny or more in-the-money. So, if the ending price was past the short strike (on the call side) they would automatically purchase the shares for your long contract and sell the shares for the short - net effect is that you get the 10 point difference minus commissions. If it was below the short strike, you'd automatically buy the shares at the long call strike price.
On the put side - the same thing happens except you'd be selling instead of buying. So, if the price was below the long put strike but above the short strike, you'd automatically sell (short) the shares.
If you don't want to end up owning or being short the stock, you should close the position prior to expiration.
Another reader has also said you'd have pin risk if you didn't close the position. This occurs when the price at expiration is very near teh strike price. You don't know exactly what is going to happen. So, if you were counting on not ending up with the shares because it was above the short call strike (just barely) the stock may actually dip down just enough at the end of the day so that the long option exercises but the short does not and you end up holding the stock when you didn't want to.
Doug
--- In OptionClub@yahoogro
>
> buy atm; call+put
> sell + - 10 call+put
> stock price moves from atm at expiration
>
> do I have to close anything? or just let expire?
>
To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch format to Traditional
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe
No comments:
Post a Comment