Selling Calls Question

Discussion in 'Ask any question!' started by Anacrusys, Jul 24, 2020.

  1. Anacrusys

    Anacrusys New Member

    Joined:
    Jul 24, 2020
    Messages:
    5
    Likes Received:
    0
    ...
     
    #1 Anacrusys, Jul 24, 2020
    Last edited: Jul 24, 2020
  2. Anacrusys

    Anacrusys New Member

    Joined:
    Jul 24, 2020
    Messages:
    5
    Likes Received:
    0
    ...
     
    #2 Anacrusys, Jul 24, 2020
    Last edited: Jul 24, 2020
  3. Anacrusys

    Anacrusys New Member

    Joined:
    Jul 24, 2020
    Messages:
    5
    Likes Received:
    0
    I sold some covered calls today it was my first options trade. If the calls move in the money, Can the shares be taken from me anytime even before expiration if excercised? Am I matched up with another individual trader inTD Ameritrade? How often are ITM calls excercised before expiration? Mine expire on 8/14.

    Can my shares just disappear out of my account at any time before expiration when the calls are in the money? This is very concerning because I would want to make another trade immediately when I lose the shares, and I can’t watch my account all the time. .
     
    #3 Anacrusys, Jul 24, 2020
    Last edited: Jul 24, 2020
  4. B Russ

    B Russ Well-Known Member

    Joined:
    Sep 25, 2017
    Messages:
    556
    Likes Received:
    344
    Covered calls will be exercised on 8-14 end of trading day IF they are in the money. Generally by .01¢. You can buy equal calls to close the contract at any time before that, if u wish to keep your shares and it moved against you.

    a really great trick you can do if the stock moves south, is close the contract by buying calls for a discount.
    If u sold for say $2 per contract, stock moves south, u could buy back at lets say $1 per contract, u pocket $100 per contract and are not at risk of losing shares anymore. But if u do not fear them getting into the money, u could always not buy the call back, and keep all $200

    as far as being matched. U cant think of it like that or your head will explode. Mine did. That contract is one among millions. At any given time, it may be valuable to anyone else of the millions playing the same strike, even though it isn't to you. Or the other way around. Though there are always going to be losers, somebody doesn't necessarily HAVE to lose for you to win. Though most will inevitably expire worthless. But The person that bought it from u could have been closing a sell that they did 3 days ago. They could have been opening theirs. Rolling... Could have been part of a straddle. So many variables, but not a worry of yours.
     
    #4 B Russ, Jul 24, 2020
    Last edited: Jul 24, 2020
  5. Anacrusys

    Anacrusys New Member

    Joined:
    Jul 24, 2020
    Messages:
    5
    Likes Received:
    0
    Cool thanks! I’m almost positive I read an article that said shares could be excercised and called away anytime they move into the money before expiration, but it sounds like that is not the case.

    Edit: I just found this on the CBOE site, which leads me to believe they can take my shares before expiration. Oh well.


    “When and how is an equity option exercised?
    An investor with a long equity call or put position may exercise that contract at any time before the contract expires, up to and including the Friday before its expiration. To do so, the investor must notify his brokerage firm of intent to exercise in a manner, and by the deadline specified by that particular firm.“
     
    #5 Anacrusys, Jul 24, 2020
    Last edited: Jul 24, 2020
  6. B Russ

    B Russ Well-Known Member

    Joined:
    Sep 25, 2017
    Messages:
    556
    Likes Received:
    344
    Ok somebody maybe better check me, but i did not think a seller is at risk of losing the shares until the expiration date?
     
  7. MarkITRight

    MarkITRight Member

    Joined:
    May 23, 2018
    Messages:
    66
    Likes Received:
    24
    So you can technically get assigned at any time. \
    Typically the deeper in the money the option is, the less time value and more likely it is to be assigned.

    Arbitragers are buying, selling, and exercising options while hedging with equities all the time.

    On expiration date afterhours activity also plays a big role in whether or not option holders choose to exercise and if you in turn will be assigned.

    The way option assignments work is purchasers of options exercise shares... OCC takes exercises and allocates assignments to firms at random. Brokerage have a systematic option assignment lottery and choose which of their accounts will be assigned.

    : )
     
  8. MarkITRight

    MarkITRight Member

    Joined:
    May 23, 2018
    Messages:
    66
    Likes Received:
    24
    Also European options can only be exercised on the expiration date.
    American style options can be exercised at any time up until expiration date.
     

Share This Page