short straddle, what if expires ATM

Discussion in 'Options' started by cqm, Feb 9, 2012.

  1. cqm

    cqm

    Short 1 35 Call
    Short 1 35 Put

    in an off chance scenario, XYZ expires at 35


    both calls are less than .01 ITM and expire worthless?

    just curious, not placing bets on that
     
  2. You may or may not get assigned. You won't know until Monday morning. Some assignments may cancel out some will not.
     
  3. You have 4, count'em four, different exercise scenarios to consider. :eek:
     
  4. cqm

    cqm

    what are you even talking about

    there are two contracts, same strike, same expiration date
     
  5. 1) Well, since you aren't "placing any bets on that", what does it really matter? :confused:
    2) You can be exercised on:.....none, one, the other one OR both, which is similar to none as long as you haven't hedged elsewhere.
     
  6. cqm

    cqm

    re: 1) I always plan to close before expiration. But with strangles sometimes both will expire OTM and you can just ignore it. Now I wanted to know if it was possible for the same thing to happen to a straddle

    re: 2) ah yes of course. I didn't know thats what you were getting at
     
  7. 1) To ignore any option(s) is bad.
    2) It's better to offset the expiring position sooner when the premiums get "teeny" and roll it into something with more juice. :cool:
     
  8. johnnyc

    johnnyc

    you can still get assigned on an OTM position, safest bet is to just close it out
     
  9. Decisions to exercise are made during the day when price isn't at the strike and when people are using that exercise to cover other positions. So AFAIK, you could be assigned despite the favorable expiry. Therefore, why would you take any chance whatsoever with pin risk?
     
  10. Nothing, as long as you don't shart. If you do, and the stock pins.... you achieve time travel.
     
    #10     Feb 19, 2012