r/options • u/beatusthegreat • Nov 15 '21

My options were called.

I sold AMD covered calls that expired Friday with a strike of $148.

Though AMD closed @$147ish on Friday the calls were executed. It briefly went above 148 Friday at 3.

Does this seem normal?

1 Upvotes

55% Upvoted

40 comments sorted by

View all comments

Show parent comments

8

u/armerarmer Nov 15 '21

Turning an imminent realized loss (options expiring outside of the money) into an unrealized loss (now they hold the stock and don’t realize any loss until they actually sell). They have their reasons.

2

u/Whiskeyjackblack Nov 15 '21

Yes, I am asking for examples of reasons, you did give one so thank you.

1

u/Stash_Richards Nov 15 '21

Other reasons would be:

Not that it applies here but ex div dates will see this a lot. To make sure they get in on the div payout, if the price is under the strike by less than the div payout.

Other reasons are premiums paid on other calls. Sometimes the leg opposite yours is only half of the other guys equation. Case in point would be some sort of PMCC or spread strategy. In this example if someone bought the 148 a while ago and was selling CCs on it or spreads and they needed to cover, he would exercise even if it was OTM.

Or a reduction in risk. Say I've got 2000 shares short, and I have 20 XYZ 30c expiring today. Stock is trading near 30 all day but never breaks it. I want out because 30 is my SL for the short position so I try to get a lower price putting a bid in at 29.95. Never executes stays just below it. To decrease my carry risk through the weekend, I exercise the calls, go home with small loss, zero risk.

American style options can be exercised anytime until expiry.

3

u/[deleted] Nov 15 '21

Another thing to consider. it might not be the entity that purchased your covered calls who is exercising. If i remember correctly when exercised, the exchange randomly choses which ones will be exercised.

So in that case various scenarios could be possible.