That would make the opposite of sense. You are getting shorter on a down move. That's a bad thing? a) Don't exercise call, hold short/ or sell underlying against it. You're flat but if market craps = Huge win. b) exercise call. gave up a free put. You're Flat. Market craps = 0. "Back to the original topic, if you were selling that specific DITM call in a combo like a box, the small profit you get from the early assignment will probably not compensate the troubles caused by that missing option in your combo." yep, I'll say it again, and preface it again with 'no one listens.' The formula for whether you exercise an option or not depends on you purchasing in the corresponding OTM option. You ALWAYS buy in that f'n OTM option!!!! (Unless you already have a shit ton of long OTM options in that area)
Nah, it's when you put on a Sacramento game, and turn to someone and ask how they are on the Steph Curry 20 point call, or the 20-25 call spd that you realize there is a problem. Don't remember a time waiting for the 4-5-6 line that we didn't make markets on when the train would come. Nothin' like sellin' the 10 minute call and hearing the announcer saying the line just shut down. This is how you learn catastrophic risk.
"Trading isn't gambling." Well... yeah, but... except for that one time... OK, maybe those five hundred times, but who's counting? (Watch pro traders, and you'll inevitably hear stuff like "yeah, so what's the spread on this baseball game? I'll take that", or "I've got a poker game planned for later", or... endless variations. Trading may not be gambling, but many traders are gamblers.)
You don't exercise the option! You're selling it. One another party will exercise it. So you earn a little profit, the time value but that still sucks. A bit dangerous when selling for 20 millions of boxes...
True but, put-call parity arb states that: c-P=S-Xexp(-rT) So lets construct a trade that we buy a put, sell a call with the same strike, then buying spot. At exp the trade is worth the strike price P-c+S=Xexp(-rT)