Any of you more experienced hands willing to help me out? I have a few SPY October iron condors that went straight through the vertical put spread and I was just leaving them to take the loss when they expire. But someone has exercised 7 contracts of a short 122 put (which was paired with the long 120 put) leaving me with 700 long SPY stock and a very weird looking IB account where cash which was +15K is now -70K, excess liquidity of -11K etc What action should I take to minimise any potential losses?
The obvious solution is to exercise the 120 puts to cover the long shares, or you can just close them out by selling them in the market. Any other action is an entirely new position (i.e. trade) and it's up to you to decide what to do.
Thank you kind sirs for chipping in! You are tops. Although a novice at this exercise business, I had figured that exercising the 7 long 120 puts was the easiest thing to do What I'm still unclear about is whether I will be subject to variations in loss i.e. I know I am up for the 700 x $2 =$1400 loss on the difference between the 120 and 122 puts but am I up for more or less depending on the price of SPY today. Or does covering simply keep it at a constant $1400 loss?
Exercising the puts locks in a maximum loss. You may do better by selling out your 700 shares AND selling 7 new puts, Same strike as earlier, or different. You have ZERO additional risk as a result of the exercise. ZERO. IB is notorious for bad 'marks' at the end of the day. They are also notorious for closing the position for you. Take a look this morning, you may find your 'available funds' is a + number. Don't worry about cash. If 'funds' is ok, you can carry the position. Don't panic. The big rally this morning may provide you with a chance to reduce your loss, but your puts are still very far ITM. Mark http://blog.mdwoptions.com/options_for_rookies/
Hello dagnyt, nice to hear from you again, you gave me some good advice recently remmeber when IB sold my 121 calls at a higher price than I had to buy back the 123 call on Sep expiry! Do you really think I'm better off selling the 700 SPY stock and 7 x 122 puts than exercising the 120 long puts? If you say yes, I'll go for it. But remember, I dont want to game the position, I just dont want to get ripped off (like last time) - and your comment that IB is notorious for 'bad marks' has me worried.
I forgot to mention - my IB account is showing -21K Current Available Funds and 0 Buying Power and a big red bar across the -10K excess Liquidity!!
No, not this close to expiration and this deep in the money. Exercise the Oct puts to flatten your position (which will reset your buying power). If you decide to initiate another IC you can begin doing so using Nov strikes.