Explain how it went wrong?

Discussion in 'Options' started by res123, May 12, 2018.

  1. res123


    Hi All-

    This morning, to my horror, I find a total of 100 shares of AAPL stock is sold short. I never triggered this transaction as I am long/Bullish on AAPL.

    I noticed that I am only seeing an open long call option, which was supposed to be a credit call spread on AAPL. I owned some shares of AAPL (less than 100), not only am I seeing the stock I owned as sold, but an additional stock sold amounting to a total of 100.

    I am new to option trading, mostly sticking to selling options and rolling up and down the spreads of the iron condor. What could this be? Did I get assigned? How do I rectify this, as I do not want my stock sold and certainly don't want to be short stock? Any suggestions?
  2. From your statement, the order you placed may have been the one you intended, but failed to consider the risk of your short leg being assigned! -- This is more serious, and may suggest you are making trades without understanding what you are doing (the risks of each trade). You may wish to cover your short positions ASAP to protect you from a possible move up on the AAPL next week. (Review the strike of your short leg for your order and compare with price range on day of assignment -- also note that yesterday was x-dividend day for aapl that you may have failed to consider with your original order)
    spindr0 likes this.
    • A few weeks ago you sold a 185/190 credit call spread - OTM at the time.
    • AAPL closed at $188.59 on expiry day.
    • ITM short 185 calls auto exercised - 100 AAPL shares sold at $185.00.
    • OTM long 190 calls expired worthless.

    Monday morning buy 100 AAPL shares.
  3. lindq


    Failing to understand all the risk parameters of a position is, IMO, the leading cause of complete meltdowns by many new traders.

    That's a lesson I learned the hard way many years ago.

    A trader should never, ever, open a position until completely clear on all the risks through a full range of possible scenarios. Because anything that can go wrong, very possibly will go wrong.
    DeltaRisk, spindr0 and comagnum like this.
  4. Pin for the win!

    That's like the greatest thing that can happen to you when you're short premium. Buy the shares, short the call again, and collect a second round of premium.

    That said, I think you're confused. A credit call spread is a bearish position, not a bullish one.

    So, you're either unclear on your position, the expiry, or you're looking a gift horse in the mouth. Perhaps some more details (the specific position, including expiration and strikes) would help us figure out which?
    • He also had a short put spread
    • Short iron condor = Neutral
    • Plus the AAPL shares = Bullish/Neutral
  5. Did he? I didn't read that anywhere.

  7. @OptionsOptionsOptions, I read that, but my inference was that he would have specified IC instead of credit call spread if that's what it was.

    Really a moot point though...we still need to know the details of the trade. We still don't know of this was a diagonal or vertical, and if this was auto exercise or early assignment...but being that he's got an open long call, and he hasn't specified it's not a vertical, it sounds like early assignment, which is a good thing regardless if he's bullish. The recent run and ex-div support the case for early exercise.

    Edit: oh, just realized if they're deep ITM calls, he may have left the div on the table which probably offsets the premium gain.

    • I think that long call (190+) expired worthless OTM on Friday.
    • Since it wasn't sold-to-close it still shows up in his account - and should disappear in a couple of days.
    #10     May 12, 2018