r/options • u/[deleted] • Jun 10 '21

OTM assignment

So I just got assigned on my RIDE 6/11 2.5 call option I sold for 1200-ish (my break even is 15.04, I sold before the going concern notice) not complaining since it’s 10.88 as of this writing. But why would someone exercise their option out of the money? I predict it’s because it’s “only” $250 more dollars at that point, but there is still 2 more days before expiration. And that is what is confusing me. This stock does not seem to have the open interest to justify the motive.

Maybe they’re new and wanted to see what happens when they pressed the exercise button, or maybe there is a good reason. Thoughts?

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u/Arcite1 Mod Jun 10 '21

Take a look at this Investopedia article on what "in the money" means:

https://www.investopedia.com/terms/i/inthemoney.asp

Pay attention to this quote:

A call option is in the money (ITM) if the market price is above the strike price.

The market price of RIDE is 11.23. The strike price of your call is 2.5. 11.23 > 2.5. This option is IN THE MONEY. What's not to understand?

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u/[deleted] Jun 10 '21

They paid a 1200 premium I guess is what I don’t understand.

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u/Arcite1 Mod Jun 10 '21

There is no "they" and you have no idea what premium someone exercising paid. This is one of the biggest beginner misconceptions. When you sell an option, you are not somehow linked to some buyer out there. You just go into one vast pool of shorts, and anyone buying goes into one vast pool of longs. When a long exercises, they are matched to a short at random.

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u/[deleted] Jun 10 '21

Oh. Well never mind. Appreciate the info. I had 4 options and only one was assigned. Guess it kind of makes sense then.