It would be easy to analyze, had you included the strike. If the call is OTM, then you can assume that it won't be exercised. If the call is ITM with little or no tv by late trading Thursday, then assume that it will be exercised. If the call is near ATM or ITM with tv, then it's likely that it won't be exercised, but you can't be certain here. There is a considerable window for exercise in AH, so if SPY should fluctuate in that direction, then ITM calls with tv may be exercised. Or the call may be borderline, where some are exercised and some aren't. Your decision should be made no later than close of option trading Thurs. If the call is already ITM and no tv, then you are already near max. profit. You may consider closing it, rolling it or hedging it. Get rid of the risk of the short call.
Anyone know more details about this? http://online.wsj.com/article/SB10000872396390444620104578011112447236182.html
Actually, it's a bona fide strategy utilized by large prop groups. There are a few variations, but the idea overall is to be short of whole bunch of deep ITM calls on the night prior to ex-div date and holding full delta against them in one or another form. On large ETFs, a fair number of people forgets/forgoes early-X, e.g. on SPYs it's about 8-10% of total position that do not get early X-ed. I think the f*ck-up at BoAML was on the back of a variation where you buy and sell the same calls in two different accounts, early X the long position and hope for a high enough idiot factor on the short position. In this case, I would not be surprised if it was a pure operational SNAFU.
I never said that it wasn't a bona fide strategy. "Not likely" refers to the probability that OP might get some. You act as though, somehow, you are contradicting what I wrote. Is "a pure operational SNAFU" a fancy way of saying that they didn't exercise their calls?
Of course I am contradicting you. Probability of OP getting some un-X calls is about 1:10, like everyone else. If you are a long a 100k, chances are 8-10k are not gonna get X-ed, if you do it every expiration. There is no real difference if you sell a large block or bleed them out 1 lot at a time. You just have to be short enough contracts. The main limitation in this trade is the balance sheet cost, which is why most people involved in these trades are bank prop desks. PS. Explain to me the whole attitude thing here - aren't we here to learn from each other? If I am contradicting someone or arguing, it's because it kinda helps to know what's true and what is not, what works and what does not.