VXX Exercise Play

Discussion in 'Options' started by FSU, Nov 2, 2012.

  1. FSU


    So, VXX closes today at 34.95 at 3:00 central. Options close at 3:15 central time. VXX is trading up between 3 and 3:15 around 35.30 and the Weekly 35 call was trading .46 even though it was out of the money based on the closing price of the VXX.

    In order to exercise your 35 calls you would have to file a contra exercise advice form with your broker. The question is what percent of these calls do you think would be exercised? Seems like a great play to sell say 10 of the 35 calls at .46 and buy some number of VXX shares in the after hours market, maybe 400 shares?

    What do you think the right ratio would be here?
  2. 1245


    Don't these settle in cash based on the settlement price at 4pm ET.
  3. FSU


    No, VXX options settle into the VXX etf
  4. FSU


    So, gave it a try today. VXX closes at 34.74. At 3.13ct VXX is trading at 24.58 (technically after hours). I sold 10 of the expiring 34.50 puts for .05 (so they were .24 out of the money based on the mark). At 3.20ct VXX was trading at 34.45(after hours).

    Am curious how many if any puts I will be assigned on. My guess is none, so I will be enticed into putting this play on much bigger and then getting hosed later.