Buying a call spread; is it possible with IB to sell the long leg if the short leg is exercised?

Discussion in 'Options' started by Justanotherguy, Aug 2, 2020 at 3:49 AM.

  1. Hi.
    I have a question; let's say I bought with IB a Call option spread and, after a while, both the legs are ITM.

    Is it possible to add a conditional order and sell automatically the long leg if the short leg is exercised?

    I have searched for an answer on the internet and in this forum but without success.
     
  2. guru

    guru

    I don’t think it’s possible, and I didn’t see such functionality at any brokers.

    And if the short leg is assigned or exercised then you’ll be short shares and the long leg continues protecting you, so most people may not want to sell it, but possibly close/exit the combination of shares and the option.
     
  3. I was asking my question as I don't understand why, if somebody exercises the leg I sold him, I can't use my long leg automatically to protect me. In this case, in fact, I would get the value of my spread without the need to sell to this hypothetical guy the shares I don't have and after that have to sell my long leg.
     
    Last edited: Aug 2, 2020 at 4:11 AM
  4. Poljot

    Poljot

  5. Poljot, I know they are independent contracts but that doesn't change the fact they are related to one single strategy, the spread, and therefore it would make sense to use the former to be protected from the latter.
    Anyway, I assume you meant to confirm the TWS doesn't have this feature.
    Thanks for your answers, guys.
     
  6. zdreg

    zdreg

    You can sell the long leg if you have assets in the account to support a naked short position. Automatically is out of the question as it creates too many potential margin calls.
     
    • Once your credit spread is ITM it's best to close the trade.
    • Next trade should be only a long option for maximum return on your dollar.
    • The short leg of a credit spread in most cases will cause you problems.