if I have a naked straddle at 190, and the market closed at 189.5, but then hit 190.5 shortly after hours in the first 5 minutes, what is the most likely assignment? 1) the puts more shares to me 2) the calls taking my current shares 3) they both exercise and cancel each other out 4) neither exercise
in the past on SPY on that day NVDA caused the market to go up 2% after hours last year, I had short calls and they got assigned, even though the closing price was lower, because the deadline for assignment was not until sometime after hours.
From AI... Options can be assigned on any business day, but the likelihood of assignment increases as the expiration date approaches, especially for in-the-money (ITM) options, and can occur up to 30 minutes after the market closes. Here's a more detailed explanation: Assignment vs. Exercise: When an option holder exercises their right to buy or sell the underlying asset, the option seller (writer) is assigned the obligation to fulfill the contract. Timing of Assignment: Before Expiration: Option sellers can be assigned at any point before expiration, even on a business day, if the option holder exercises their right. Near Expiration: The likelihood of assignment increases as the expiration date approaches, especially for ITM options. Automatic Assignment: If an option is ITM by as little as $0.01 at expiration, it will automatically be exercised for the buyer and assigned to a seller. Factors Influencing Assignment: ITM Status: In-the-money options are more likely to be exercised and assigned. Time Decay: As the expiration date nears, the time value of the option decreases, making ITM options more attractive to exercise. Strike Price vs. Underlying Asset Price: A large difference between the strike price and the underlying asset price increases the likelihood of assignment. Options Clearing Corporation (OCC): The OCC randomly assigns exercise notices to option writers when option holders exercise their rights. Assignment Cutoff: Options exchanges have a cut-off time of 4:30 p.m. CT for receiving an exercise notice. Another boring read...AI. "At expiration when can options be assigned"? On options expiration day, in-the-money (ITM) options are typically automatically exercised, meaning the buyer of the option will be assigned to buy (for calls) or sell (for puts) the underlying asset at the strike price, while out-of-the-money (OTM) options expire worthless. Here's a more detailed explanation: In-the-Money (ITM) Options: If an option is ITM at expiration (meaning the market price of the underlying asset is higher than the strike price for a call, or lower for a put), it will likely be automatically exercised. Out-of-the-Money (OTM) Options: If an option is OTM at expiration, it will typically expire worthless, meaning the holder loses the premium paid for the option. Automatic Exercise: Brokers typically automatically exercise ITM options on expiration day, even if the option is only in the money by a small amount (e.g., $0.01). Do Not Exercise (DNE): For stock and ETF options, the option holder can request that their broker not automatically exercise an ITM option, a request often referred to as a DNE. Index Options: Index options are European-style, meaning they can only be exercised on the expiration date, and all ITM index options will be automatically exercised. Assignment Timing: The Options Clearing Corporation (OCC) processes assignments after the market closes on the expiration day, and the funds and shares resulting from exercises are credited to your account the next trading day. Risk Management: For both option types, you are responsible for actively managing your positions, including closing or rolling options positions before they reach a critical point of assignment risk. PS A looong time ago, I had an option expire at the money...To the penny. No after hours trading on it. Would they...Won't they?? This was when it would cost me about $30. to $60. to trade stocks...Morgan Stanley. They chose not to fill...
The key here is where the stock is trading just before the exercise cutoff time of 530pm et. Options that are in the money based on the 4pm closing price of the stock will be auto exercised, but the owners have until the 530 pm et (some brokers may have earlier cutoff times) to cancel the auto exercise or to exercise an out of the money option. So, you won't know for sure in your example. It will depend on where the stock is trading before the 530 cutoff time and how many professionals vs retail own the options (assume the pros will be up on the after hours movement). You may be assigned on some of both the calls and puts or none, or all.