Might Be in Trouble: What happens when a Naked Put Expires?

Discussion in 'Options' started by zghorner, Sep 6, 2019.

  1. zghorner

    zghorner

    I shorted a $19 put on HAL when it was trading at $19.50: 70 contracts @ $5.40 each contract. Price of underlying is currently $18.87 and they expire today. Im having a hard time finding a clear answer as to what happens if I dont exit my position before the market closes today. I wouldnt be too upset about owning Halliburton @ $19/sh but am i correct that i will be responsible for buying 7,000 shares? 70 contracts each representing 100 shares...7000x$19=$133,000?
     
  2. Yep, plus your brokers assignment fee.
    Why not close the position now?
     
    KeLo and krugman25 like this.
  3. krugman25

    krugman25

    Yes, you will certainly own the shares as if you had just bought them at market. There was nothing preventing the shares getting put to you before expiration. Just keep that in mind in case you someday wake up owning a whole bunch of shares and it's not expiry yet.
     
  4. You shorted $19 Strike HAL OTM puts @ $5.40 each contract????

    Something don't sound right.....that price cannot be true.
     
    vanzandt and stepandfetchit like this.
  5. zghorner

    zghorner

    at the time i shorted the $19 strike put the underlying was trading at $19.50.
     
    Last edited: Sep 6, 2019
  6. zghorner

    zghorner

    I am surprised my broker allows me to short these when i dont have the funds to cover. The mistake is obviously all mine not theirs im just saying...crazy how a $380 play can turn into $130k worth of stock.
     
  7. zghorner

    zghorner

    I will close it as i dont have the funds to cover that many shares. I was just wanting to make absolutely sure what the consequences were.
     
  8. Agree with El OchoCinco! The price does not match your description. The highest price I observe was 1.95 on 8/27/19. (I likely do not have all trade data, but this is a huge difference)
     
  9. krugman25

    krugman25

    That is normal. I think most brokers will turn around and sell the shares to cover if you don't have the funds. But then you are talking about a lot of unnecessary fees. I would either close the options position or roll out to the next expiry if you are still bullish and have the maintenance to keep the position open.
     
  10. rb7

    rb7

    Your trade cost you $37800, not $380, if you traded 70 contracts.
     
    #10     Sep 6, 2019