I woke up to a few Option Assignments this morning. The usual reason, Ex Dividend. They were all Verticals, I'm long the Calls at a lower Strike, so no worries. I've had plenty of Assignments before, but never with a stock in this price range (HD). I'm only writing about it because for years, I've usually done Covered Calls, only within the past few years have I been writing Verticals, instead of owning the stock. It's really changed my way of thinking. I still do CC's, but above a certain price, I'm thinking a Vertical. The obvious reasons, less capital risk and greater ROE/ROI.
if you're long the Calls at the lower Strike that means you bought the vertical; capped downside/upside. CC capped upside. You can do a risk reversal or collar
You screwed up If you are getting assigned on your short call from the vert,odds are pretty dam high you should have exercised to capture the dividend.. Factor in carry and the price of the corresponding put
If you don't want to exercise then you need to look at the synthetic to see where the forward is trading to avoid f-ups like this... or simply exercise your call.
p.s. you are long the lower strike call,so you are buying verticals,not writing them... Did you get assigned in HD?? Thats a 2.25 dividend you just got clipped for What Vert were you long?? You do realize you are now in a synthetic put after eating the Div
Jesus harsh much? Be gentle with Arnie already. Unless he's opted not to auto-exercise, chances are his longs are already auto-exercised to buy the shares at a lower price to cover the assignments. It's just that he won't get dividends unless he's already long the undie but he's earned some profit with the exercise and the assignment if the long calls are with lower strike.
Oh it's early assignment. Ok well in that case, whether it's exercising now or later, it doesn't matter, you won't be getting the dividends unless you've longed more calls than shorting them. What a bummer. Usually when the calls are being exercised early is because the dividends are really good. So what you can do is sell the long calls now before the ex-dividend date and then buy the shares back to close out the shorts in the underlying from the assignment after the stock goes ex-dividend. So that way it's as if you earned the dividend but at the same time you make some profit from the long calls and you covered your shorts. Hopefully this works out and the undie doesn't keep going up after it's gone ex-div.