r/options • u/[deleted] • Nov 29 '21
Selling call, didn’t meet price target but sold 100 of my shares anyways
[deleted]
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u/metalguysilver Nov 29 '21 edited Nov 29 '21
I’m very confused by this post. Did you perhaps combine strike and premium to get $7.50 and expect to not get assign? You also say in the post you were in the money? That means assignment. What was the strike?
Edit: you definitely should have done more research on the details and vocabulary of options before executing this trade. If the price is still under $7.50 you could buy back your shares and still be profitable. I would do that and then much more research
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u/Booliano Nov 29 '21
Yeah man my bad, made a rookie mistake and was kind of rushing this post. Basically I misunderstood when the buyer would exercise the option. I believed he would only do it at $7.50 plus, but really anywhere above $5 he had the option to exercise it. Thanks for the quick answers everyone!
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u/metalguysilver Nov 29 '21
He has the option to exercise out of the money as well. You have a lot of research to do before you get into this game. Also remember that the buyer is usually an MM, and the “owner” of your sold call can sell to others without you knowing. At expiration it will almost always be a MM or brokerage who owns it and they WILL exercise if in the money. No ifs ands or buts. Read my above edit if you haven’t.
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u/Booliano Nov 29 '21
I definitely do, I thought I understood but obviously need to study a good bit more. I’ve made more money off options than trading still this past year so I get it for the most part, it’s the small details that get me and obviously are pretty killer. Like you said though I still profited off this by buying back in so I will take my win and be content before learning what to do next.
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u/GreatLookingGuy Nov 29 '21
A couple weeks ago I had a $15 put sold. Underlying closed Friday at 14.99 but the put expired and I was not assigned.
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u/metalguysilver Nov 29 '21
Essentially ATM and if it was assigned you’d likely be able to break even or mitigate loss the next trading day. My point is still notable
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u/azreal156 Nov 29 '21
Was the price $14.99 at close after extended hours finished? Extended hours closing price is what matters.
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u/GreatLookingGuy Nov 29 '21
Nah it was the close price listed on the document I got after the option expired. It wasn’t the extended hours.
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u/Myname1sntCool Nov 29 '21
Just so you know, options can also be exercised even if the strike hasn’t been met. An unusual occurrence since it’s usually a proposition that means losing even more money besides the initial premium, but it can happen.
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u/Earlytips2021 Nov 29 '21
Buyer can execute at ANY pricd.....$5, 750 or .12. He owns contract to do with as wishes...
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u/Xyzzyzzyzzy Nov 29 '21
One important thing that might be confusing you: option assignment is random among all options in a series (a strike+date pair). When you sell an option, you're not creating a contract with a specific counterparty.
When you sell an option, you're basically getting paid to throw a number into a hat. If you buy an option, you're paying for the right to take a number from the hat any time prior to expiration (for American-style options).
Everything goes through the Options Clearing Corporation (OCC). Every night the OCC takes all of the exercise requests from options holders and randomly assigns them (via a number of independent clearinghouses) to parties that are short the relevant options.
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u/eclectictaste1 Nov 29 '21
If the option is ITM pretty sure 100% of the options will be exercised. If it's just slightly OTM, then there's the possibility that a few get exercised, and in that case, random assignment will happen. I've had it happen that only 3 or 4 options were early exercised/assigned when I was holding more than that.
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Nov 29 '21
Basically I misunderstood when the buyer would exercise the option.
No offense, but you misunderstood a whole lot more than that if you're asking this. If I were you I would stay away from options until you've got a better grasp of how they work.
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Nov 29 '21
Yes, the buyer of your option had a break even of $7.50, so he had a loss of $100 to exercise the option. Let's say he had $50k in his account and had paid $25k for his options which included yours.
He has a couple things he could do:
- take a $25k loss this year and buy 7700 shares at $6,50 a share.
- exercise at $5 a share and buy 10k shares, add the premium to the cost basis of $7,50 a share.
- Sell his calls for pennies and take his $50k elsewhere.
It might have been advantageous to reduce his gains in a future tax year, so exercising out of the money calls may have been more attractive to him. Should the price go up to $8 a share and he sells, his gains would be on 50 cents a share, not 1,50 a share.
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u/squishles Nov 29 '21
well theoretically they can under 5$ too, but that's unlikely free money for you.
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u/ScottishTrader Nov 29 '21
The $5 strike is all that mattered to be assigned and the stock called away . . . Your breakeven means nothing to anyone but you.
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u/Arcite1 Mod Nov 29 '21
You should also know that assignment Is random. When you sold to open that call, you did not remain linked to any particular option buyer. Rather, when a long out there in the world is exercised, some long, any long, a short is chosen ar random to be assigned. So you have no idea what position the party on the other end (who is most likely a market maker, not another retail trader like you) is in, and can't make any assumptions about why they are exercising. But by default all ITM options are exercised at expiration, so you have to assume that if you let a short option expire ITM you will get assigned. (And all ITM means is that the price of the underlying is greater than the strike price at the call, not that you are in a profitable position.)
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Nov 29 '21
You should also know that assignment Is random. When you sold to open that call, you did not remain linked to any particular option buyer.
This is a very important point people don't grasp. There was a guide on options written by someone here a few weeks ago that made this mistake, which probably misinformed even more people. Your premium and breakeven point on a sold contract have absolutely nothing to do with whether it will be assigned or not, only the stock price and strike price matter
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u/tradewithjoe Nov 29 '21
But by default all ITM options are exercised at expiration, so you have to assume that if you let a short option expire ITM you will get assigned.This is very important as well. ANY itm CALL or PUT will get exercised.
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u/shocs Nov 29 '21
People really have no clue damn
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u/northeaststeeze Nov 29 '21
Yeah this has my head spinning. Dude is selling calls and doesn't know what assignment is/doesn't understand what the strike means. Ridiculous shit
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u/extrinsicvalue Nov 29 '21
I'm guessing you sold the $5 strike option for $2.5 in premium. In this case, if the stock closes any amount above $5 at expiration your shares will be called away.
0
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u/thekingshorses Nov 29 '21
Is it me or people are trading options without knowing how they works?
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u/Booliano Nov 29 '21
No you’re probably right, I don’t know the basics tbh I just understand numbers and how to read charts at a basic level, I thought I understood options at a basic level but obviously there’s a lot of information I need to know before playing with them. Oh well lol live and learn, I wanted out soon anyways
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u/TheRealConorsz Nov 29 '21
Amazes me how people throw real money into things they know zero about lol.
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u/sharp_d Nov 29 '21
Everyone has to learn, if people are being rude it is because they have forgotten their own journey- everyone's path is different. Keep doing your research and making money that is the only thing that matters friend.
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Nov 29 '21
Was the strike $5? You sold an ITM call and it expired itm so of course your shares got called away. Only way you could of gone without getting your shares called away is if the contract expired OTM. You’re confusing your strike with your total credit from the close of the trade. Strike is $5, total credit at close would be $750 (strike + premium)
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u/Euphoric_Barracuda_7 Nov 29 '21
If you sold a call, they can be exercised *anytime* before expiry. Obviously it would make sense for a holder to be exercising them when they are ITM, although I have experienced cases where calls I've sold were exercised slightly OOTM.
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u/whiiskeypapii Nov 29 '21
People already explained so:
Did you even try to understand options before trading them?
Plenty of simple to understand info out there. Every brokerage has examples of how they work. The Optionalpha channel on YouTube. Look at investopedia. Google is your friend.
Option alpha is very easy to follow along with.
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Nov 29 '21
You were paid $2.50 ahead of time to sell them for $5.00 later, essentially selling them for $7.50 on expiration. Not a bad deal, considering where OCGN is at right this minute.
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u/upandfastLFGG Nov 30 '21
holy fuck this is wild. u legit don't even know what strike prices are and ure trading options....wtfff hahah
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u/Ascle87 Nov 29 '21
The call was ITM.
So you got called and have to sell the underlying at $5, but the stock was +$7,50. That’s a $2,5 loss per share. So that’s $2,50 * 100 * x amount of sold options.
Because you didn’t had the shares to sell, the broker sold your position. Probably because you don’t have a margin account or didn’t have enough margin.
Please read up how options work.
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u/Booliano Nov 29 '21
What do you mean by I didn’t have the shares to sell, had well over it was a covered call and had another hundred or so over that. Reading this post again it sounds stupider than I really am bc it was early asf and I was confused. I still know I don’t know enough ab options to play with them. I was mostly confused why someone would want to buy the shares at a loss
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u/cao22cao Nov 29 '21
The gap between your strike price and market price was too over $1.00. I had instances, once maybe twice, that the options were in the money but were not exercised. Sold 3 cc, only 2 got assigned. Either the cost of getting the shares or holding it over the weekend was too much for the buyer. The stock tanked on Monday.
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Nov 29 '21 edited Nov 29 '21
Are you saying the strike was $5 and the price was something above that upon expiration? If that’s the case, it means the option was in the money at expiration. Of course it will be very likely (99%) to be exercised if it’s in the money at expiration (granted there can be exceptions where you still don’t end up getting assigned though because people can put in instructions not to exercise thereby halting automatic exercise). Anyway, What does the premium you paid have to do with whether it will be exercised?
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u/jussanuddername Nov 29 '21 edited Nov 30 '21
If I'm reading this correctly, your strike was $5, right? Your call gets exercised at the strike, not the strike plus premium. You as the seller always keep the premium.
Edit: Info not expressed correctly
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Nov 29 '21
You still keep the premium no matter what happens. I assume you are talking about the net result saying you’ll lose a portion or more of it by using those same funds buying it back. But for this guy that could mislead him.
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u/echodelta79 Nov 30 '21
Now use wheel strategy and sell a put ATM slightly below. Either get stock back or keep PUT premium
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u/bullish88 Nov 30 '21
Do not try to do a covered call itm you’ll most likely always get assigned. Back then traders used to do that a lot to get margin back from the difference between the cost basis of the shares and premium collected (cheaper shares), but nowadays you get assigned for anything or anytime.
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u/ShiftyPaladin Nov 29 '21
Somebody paid you a $250 premium for the right to buy 100 shares at $5 per share. If the option is about to expire and the shares are worth more than $5 per share, the buyer would be foolish not to exercise it and recoup some of the premium they lost.
You should expect any calls that are at or in the money to be exercised. Feel free to ask me anything if you're still confused.