Short options at expiration?

Discussion in 'Options' started by spinn, Dec 29, 2009.

  1. spinn


    Whayt happens if you sell an option short and carry it past expiration. Does it just get closed at the price or do you end up short 100 shares of the underlying?
  2. basic: you actually get long the stock at strike price (for short put) or short stock (for short call). There are some cash settled options but considering the level of the question, I'm not gonna bother...
  3. spinn


    yeah dumb question I know...but its a 102 call and the underlying SPY is trading at 112, no way im etting this at 102, what am I missing??
  4. well there are only 2 ways this is gonna end: 1) you sell 100 shares of spy at 102 or 2) you buy to close the call you sold, either way if you do not own the 100 spy already you are loosing 8$*100=800$

    there is a 3rd choice but not recommended: you roll the option further out, you buy the one you are short and you sell another one further away at the same strike. Its very close to digging yourself deeper in sh*t but its legal.
  5. spinn


    the trade is about 30 cents in the money so Im not losing money now

    as much as I would like to sell now at 102, its at 112 now

    maybe it wasnt such a dumb question after all......

    or have I possibly discovered a loophole?
  6. nickdes


    You have a <SPY> JAN 102 CALL short,

    Did you sell it today? Trying to understand what you are asking or trying to state?
  7. spinn


    I sold a $102 SPY call near the close yesterday for about $10.80

    so I am short that call; the underlying is about 30 cents in the money
  8. what are you doing selling options when you dont even know what the possible outcomes are?
  9. nickdes


    If he sold this option today then he would still be able to get out of it without the loss you are describing... We just do not know when he sold this.
  10. SPY closed at 112.56 today, which means your option is 112.56-102 = $10.56 in the money, not 30 cents.

    At the close on Friday 1/15, the option will be worth very close to the current amount that it is in the money as calculated above.

    You can buy it back for that price before the close - if it's less than $10.80, congrats, you've made money, which means that SPY at 112.80 is your break even point. If, for example, SPY closes at 115 that day, your option will be trading around 13.00. Buying it back results in a loss of 2.20.

    If you choose to let it expire, you'll be short 100 SPY at 102. Going back to the example of SPY at 115, you can buy them back on the open Monday and eat a loss of $13.00 per share. Same 2.20 loss overall. No holy grail here.

    BTW, what broker lets you short naked calls with no options experience?
    #10     Dec 29, 2009