I wonder if the person who exercised had sold a spread of some sort that went south. They may have had to exercise your options OTM to cover their other leg that went bad/was assigned.
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I wonder if the person who exercised had sold a spread of some sort that went south. They may have had to exercise your options OTM to cover their other leg that went bad/was assigned.
Right, so OTM options can still be exercised (you'd be stupid to do so, but nothing prevents you from doing it). I haven't dug into the details of the contracts to figure out how timing on this works. But in either case, I don't like leaving it open to someone else. I'll close my OTM options ~15-30min before the close almost always. I'm that one guy who bids $0.1 on a OTM call/put 30 min before close, just because I want to cover my write, and not worry about it.
Every once in a while, I let it run to close, but I try not to make a habbit of it. Usually, I'll let OTM puts I've written go to zero, because if someone who bought them will exercise the puts, I'll be assigned those shares which is what I want.
Whereas, on calls, I'm risking getting my stock getting called away, so I'll close them out.
Yeah, or it could be something where they didn't exercise knowingly, but their broker did on their behalf... I've seen brokers do all kinds of things to people's accounts. The more complex your strategy, the more ability for the broker to screw you over if things go wrong.
adiggs
Well-Known Member
I'm the same way, but I tend to close my sold puts/calls 3-10 days before, depending on how they're developing. My thinking is that since my options are fully secured (cash or shares), I want to free up the backing to write new options and keep the time decay up.
The % decrease on a $0.50 premium option the last few days is huge! But in absolute numbers it's not that much and I'm probably better off closing and writing a new option at a later expiration to get the time decay back up. That's my thinking anyway.
Hell sometimes, I may even buy back some of those at a low preimum. Lottos because you never know. Some random tweet and $TSLA goes flying $100, or cratering $100 out of nowhere.
willow_hiller
Well-Known Member
Just ask your question either on this thread or the trading thread, you will get a response. For learning basics of options, the best site that was referred to
Just ask your question either on this thread or the trading thread, you will get a response. For learning basics of options, the best site that was referred to @adiggs is the Free Options Trading Course from Option Alpha | Option Alpha free training course. I have been trading options for some time, but still found that I learned a lot from the beginner track (watch it at 1.5X speed to reduce time). Other good threads are Applying options strategy 'the wheel' to TSLA
trading
adiggs
Well-Known Member
Not a book, but I recommend the free training on www.optionalpha.com. I've gone through it myself and found it excellent. I've also found that 3rd party review sites are universal in their praise of the quality of the education.
See the post right above this for another perspective.
You've made this recommendation a number of times. I looked at it. (It took me a number of goes to get through their sign-up process, which as a reasonably sophisticates InterWeb user bothered me.) But anyway, I was not impressed. I don't do reviews. Maybe I should.
When are we expecting to see Sep 2022 LEAPs or later expirations- in the options chain?
Is there ever any reason to assign sold LEAPS by ID in a Roth account after you close a trade by selling them?
Thanks!
Is there ever any reason to assign sold LEAPS by ID in a Roth account after you close a trade by selling them?
Thanks!
September 2022 is not one of the "normal" LEAPS dates. Don't expect them until less than a year out. January 2023 should be out this October +/- a month.
I don't understand your second question. Once you sell-to-close they're just gone... poof!
When you sell shares in a taxed account, if you want to the next day you can log in to your account and assign the specific shares you sold to a specific ID; that might affect if short vs. long term cap gains tax rate and WASH considerations, otherwise you're selling either FIFO or some other such default assignment setting.
I'm just wondering if there's ever a reason to do the same in a Roth account.
Question for folks here:
What happens if you write naked calls on a stock where you don't own the underlying, and the calls are early excercised?
Generally you just end up being short 100 shares of the stock, which is fine... But what if it's hard to borrow, and you can't short? Will your broker force you out of the position by buying the stock in the open market?
What happens if you write naked calls on a stock where you don't own the underlying, and the calls are early excercised?
Generally you just end up being short 100 shares of the stock, which is fine... But what if it's hard to borrow, and you can't short? Will your broker force you out of the position by buying the stock in the open market?
adiggs
Well-Known Member
Given that you can get your account eligible for this kind of trade, my belief (but not knowledge) is your broker will complete a market order for those 100 shares, so that you can deliver on the assignment. Whether you're assigned early or at expiration. In this case you'd probably do a limit order to acquire the 100 shares during the settlement window (your broker will be calling - this won't wait
) just to get a better price than a market order (which is also risky - the shares could move further against you!)..My expectation is that you'll find it difficult to get this level option writing permission. If you can get this level of option writing permission, then you'll either want to talk with your broker and/or research specifically what these mechanics are and know them fully.
There are mechanisms for cheaply providing the coverage though for that call. Besides owning the shares, if you buy a call to match up with the call you sell, then either youror your broker can exercise that option. Usually it's better for you to sell the option and buy the shares during the settlement period as you can recover whatever time value is remaining on that purchased option (if possible, do this as a multi-leg trade so that you don't have extra slippage between option sale and share purchase).
If you go looking for covered call strategies, you'll find this idea in articles where people talk about using deep ITM (or somewhat ITM) calls as backing for covered calls. My own take on this is I'd go DEEP ITM and a distant expiration (like say 1/2 of the share price) and 12-24 months out, and then write calls where I'm hoping to not be assigned. I'm looking for a deep ITM call with very little time value, very little movement in that deep ITM contract based on time, and as close to $ for $ movement in that underlying contract as the underlying shares. With multiple writes against a 1/2 strike call, I'm effectively doubling my rate of return by using that 50% leverage. (Definitely not advice - just an idea to research and learn more about).
I know NKLA is likely to drop, but right now the IV on NKLA puts is absolutely crazy. I was able to sell a July $65 PUT for $30. Yea, I expect NKLA to drop over the next few weeks, but even dropping back into the $20's is a fairly mild loss. If it hovers in the 50s or 60s for a few weeks, I'll make decent return.
adiggs
Well-Known Member
Like others, I've got covered calls for next week that I'll be trying to figure out what I'll do with.
My observation / contribution of the moment though - I have 915 puts for this week. Of course their value collapsed today, so closing them soon is definitely on the possibilities list. I noticed though that these options managed to increase in price from mid-morning to end of day, even as the share price went up another $10 (1015 to 1025).
I put that down to IV increasing. And I bring that up because increases in IV are great at sale time, but suck after you've sold.
So I'm letting those 915 puts age, even though there's not much left to decay, as I haven't identified a replacement position and I can collect that last $1 of premium just by waiting 1 or 2 days.
I also noticed that max pain for next week has been rising fast. It was $750 when I looked today up from $700 yesterday. Next week has over $1B difference between max pain and the 1015 share price; it increases fast from there.
I'm starting to think that low volume enables extreme moves, rather than extreme down moves. I don't trust the current breakout, but I've also seen 2 other big breakouts during my ownership period, and the last one from fall / winter was the 'small' one where the stock tripled in price (300s to 900s).
We've also seen a drastic down move from an ATH recently. Decisions decisions.
This and $5 is worth a cup of coffee.
My observation / contribution of the moment though - I have 915 puts for this week. Of course their value collapsed today, so closing them soon is definitely on the possibilities list. I noticed though that these options managed to increase in price from mid-morning to end of day, even as the share price went up another $10 (1015 to 1025).
I put that down to IV increasing. And I bring that up because increases in IV are great at sale time, but suck after you've sold.
So I'm letting those 915 puts age, even though there's not much left to decay, as I haven't identified a replacement position and I can collect that last $1 of premium just by waiting 1 or 2 days.
I also noticed that max pain for next week has been rising fast. It was $750 when I looked today up from $700 yesterday. Next week has over $1B difference between max pain and the 1015 share price; it increases fast from there.
I'm starting to think that low volume enables extreme moves, rather than extreme down moves. I don't trust the current breakout, but I've also seen 2 other big breakouts during my ownership period, and the last one from fall / winter was the 'small' one where the stock tripled in price (300s to 900s).
We've also seen a drastic down move from an ATH recently. Decisions decisions.
This and $5 is worth a cup of coffee.
jeewee3000
Active Member
As a holder of Jun22 $1000 LEAPS I'm wondering this as well.
From my limited knowledge, I gather it depends on what you want: more leverage/exposure or more safety.
A great resource from our very own TMC is this thread from a couple of years back: Rolling LEAPS?
The main takeaway there is that - IF you plan to roll LEAPS forward in time, you should do so when the price and volatility is high. Volatility (IV) doesn't weigh as much on the price of "further out LEAPS" than closer ones, therefore rolling forward (= you replace an option with another option of the same strike price but an expiration date further in to the future) is beneficial when IV (and SP) is high.
Right now would therefore be a pretty good tim to roll forward if you want to.
Wether you want to roll up or down (=replacing your option with another with a higher (up) or lower (down) strike price) depends on how much leverage vs. safety you want.
In my case (JUN22 $1000) I've decided to let it ride some more. Currently I could buy 2 JUN22 $1800 calls for every 1 JUN22 $1000 call I own, but:
- if we would reach a SP of $2000 by JAN22 the profit would be similar (actually more for the JUN22 $1000 LEAPS);
- if the SP cannot reach $2000 by JUN22 the $1800 LEAPS expire close to worthless. The $1000 LEAPS are much safer.
However, if the SP would go bananas and exceed $3000 for example (by expiry), the $1800 LEAPS would net me more profit. The higher we'd go, the better off those would be compared to the $1000 LEAPS (again: 2 vs 1 starting from today).
So again, given the above I think I'll just let the $1000 ride some more until they are DITM instead of ATM. If we reach $1500 soon by the end of the year I'll probably roll forward and upwards (JAN23 $1500 for example) If possible I'll take some money off the table then, keeping it on hand in case of another huge dip. (The best time to buy LEAPS
)Would love to hear others thoughts on how to treat ATM/ITM LEAPS for maximum performance vs. safety.
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