When the option you wrote is called away early..

taowave · Jan 3, 2022

You still arent really getting the basics of risk reversal and conversions...

If you have a really deep ILLIQUID call and want to get flat,YES you may want to sell stock as opposed to selling the call sub parity..

But why exercise the call and sell stock???? The Option is worth more Alive than Dead.

Why not simply sell stock against the call and be in the synthetic put??

Whether you know it or not,you are giving away a free put...

Your theory on market makers is waaaayy off....I was a market maker for 10 plus years on the exchange floors..This year in my personal account,I traded over 550,000 contracts..Guess how many long Call options I exercised early..ZERO..

I dont give away puts for free,not does any profitable Market maker

HawaiianIceberg said:
maybe think about it like this: Assuming you’re the buyer of a call option.. and it’s ITM… but hasn’t yet reached expiration

Using whatever technical analysis you do (or don’t), you get to the conclusion the stock has maxed out in price and about to drop down. Ask yourself, “if I think the stock has topped out, would now be a good time to exercise the call option I bought, then immediately sell the shares?”

obviously the answer is yes: exercise the option and sell the shares you just got because you think this is the highest price the stock will reach

This is all assuming no dividend is coming up.

Here’s my opinion on how options mostly work: who buys the most options? MMs. And who knows the absolute most about what a stock is about to do? MMs

So the bottom line would be: if a call you wrote is exercised early maybe now is a good time to go short on the stock

I’m asking only the people who write calls, have you noticed this behavior?
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When the option you wrote is called away early..

taowave