Is this possible with an ES option assignment?

Discussion in 'Options' started by drenaud, Jun 22, 2008.

  1. drenaud


    Here is the situation:

    Sold 1 ES put with a strike of 1,300.

    At expiration the index was at 1,275.

    it is possible to be assigned 1 ES at 1,300? (So you would now be long 1 ES with a purchase price of 1,300)

    And if so what month would you get the future in? Lets say you had a June put. I am assuming you could not get a June ES since that is now expired too. Is there a way to end up long 1 ES September?

    Thanks in advance for any help.
  2. The quarterly ES futures and options contracts settle in cash. So a June ES put sold at the 1300 strike with index expiration at 1275 would result in a $1250 debit to your account and no position.

    If you sold a July ES put at the 1300 strike and the September future was below 1300 at July expiration you would end up long 1 September ES at 1300.
  3. drenaud


    That is fantastic info.

    May I ask one more?

    Lets say I am now long 1 September ES Future. The expiration is approaching. I want to maintain the long exposure.

    How do I continue the exposure past the September expiration? I am assuming I would have to sell the September and buy the next Quarterly.

    If this is correct is this called 'rolling?'
  4. dmo


    Exactement. The most-traded futures contract is called the "front month." The "rollover" is when - shortly before expiration - people who have a position in the front month get out of that position and take the same position in the new "front month."

    If you were long the September and wished to maintain the long exposure, you would do it exactly as you said - sell the sep and buy the dec.

    However - this is normally done as a single spread transaction - not separately selling the sep, then buying the dec.
  5. Tums


    Good question.

    But you really should go to the exchange website and read up the contract specification. It states the settlement method and procedures. It also lays out the duties and responsibilities of each party under various scenario. This is basic stuff that you don't want to rely on second hand information. It is your money.