I am confused how it works Lets suppose I have created short position (either PE or CE side or both) on 0dte suppose - my short strike becomes in the money at 10 am - in that case can I be assigned early? or I can be assigned only if my short strike remains in the money till 4.15 at market close or goes in the money before l 5.30 pm(after hours) In short during the day strike becoming in the money wont lead to early assignment?
As a preliminary observation: In theory, you can be assigned even if the option is not in the money, and it is also possible that you will not be assigned even if the option is in the money. Both of those scenarios are very, very rare, but it does happen. An option may be in the money by only a couple of cents, and the holder may instruct the broker not to exercise, because the commission might be greater than the profit generated by exercising the option. That is one example of why it could happen. Now to your question: Even if your counterparty instructs the broker to exercise an option at 10:00 AM, the sale or purchase of the stock does not settle until the next day. It does not matter what time of day the instructions are sent. Once you reach the day of expiration, I don't think it's really an early assignment.
Thanks so it is possible to be assigned at 10 am - I thought at the end of the day if its in the money than only seller will be assigned ...wow this is risky if it can be assigned early
Read this thread again https://www.elitetrader.com/et/threads/confused-about-spy-0dte-cut-off-time-for-assignment.381388/
What you are not accounting for is that the holder of the option has until 5:30 PM to give the broker instructions. So even if they send instructions at 10:00 AM, they can still change those instructions until 5:30 PM. An assignment that occurs on the day of expiration is not an early assignment, in my view. Regardless of what time the instruction is sent, it does not become effective until after the market closes, and the settlement does not take place until the next day. And the party getting assigned does not know about it until after the market closes. It is not an early assignment unless the settlement occurs before the day after expiration. In other words, if you don't have to deliver the underlying until the day after expiration, it's not an early assignment.
Yea when I started trading options I thought you were only assigned the day the contract ended, however nope.... You can be assigned at ANYTIME !
Yep, one time I was assigned shares and hours later i saw the shares in my account but could not sell them, ...found out later that the underlying shares i was originally assigned were s taken back because the stock had moved in my favor after hours ..
I used to worry about this when I was new. But your broker will kick you out of orders (margin sell order) if you have too many contracts and have pin risk. In theory of the market is random, being assigned is just a conversion of your position to higher delta / more loss and gain potential. It should average out. It almost works that way though I find assignments tend to be during more volatile periods. Generally you will get assigned when something is deeper ITM, well before expiration. Between 4-5:30 is an awkward time. I wouldn't worry about it too much, or trade European style index.