I had shorted Nflx $337.5 PUT expiring last Friday, nflx closed at $337.59, it went down to $337 after hours, but my put option got assigned, is this a mistake or it's legit? Thanks
If your broker provided you the assignment, then we in this forum have no reason to tell you this is not real. OTM options are often assigned when the stock crosses the strike after hours. Most brokers accept exceptions after hours. I think our cut off is around 4:45-5pm ET.
If a MM or customer is long that put and can buy stock below the strike, they can then file the exception and lock in a profit. A customer needs to have the available margin to enter the stock order.
Is it possible to do that when you are short an option that is fluctuating around ATM level? I guess I'm asking if there is a way to hedge short options properly without buying it back, you could be short a ton that is worth only a few cents at expiry and the transaction cost + spread make buying back costly. However you dont want to be subject to gap risk the following day which can happen as you dont know whether you are assigned. At least for futures, u know exact settlement time and price.
You are taking the risk of a position the following trading day while when long, you have 100% control in equity options. The CME got rid of exceptions on many symbols. They call it Contrary Instructions. https://www.cmegroup.com/clearing/contrary-option-exercise-instructions.html
This happens all the time. IB typically will give you till about 5 pm to exercise so even a retail account can get on the bid - buy the stock below the strike and exercise puts. I have done it many times. I have seen rules that stipulate an OCC final deadline that is later (5:30 or maybe 6 pm) and it is my belief that MM accounts have longer than retail and this does make it a little unfair. I once had a position (conversions/reconversions) where I was unable to exercise puts after a stock tanked (it was about 5 pm) in the after hours but many call holders (probably MM accounts) were able to lapse their long calls (not exercise long calls that I was short that were in the money at 4 pm but out of the money after 5 pm) so I ended up long the stock. I try to manage these positions by covering any short positions that are within about 10% of the strike just prior to 4 pm, keeping the notional value of any conversions to a fraction of my NLV and also staying away from any equity awaiting substantial news (FDA type stuff which can happen friday after the close). Even if it is a once in a million thing for "a 50% move" after 5 pm - it can happen. so its about managing your risk. Not much really happened this past friday (or most fridays) after the close but others traded down slightly (Amzn was offered down over $2 after the close with others like GOOGL, NFLX, TSLA NTES and NVDA down slightly: all less that .5% but you could be long going into the open Monday).