Op was talking about his assignment on Thursday, not Friday. This was an early assignment due to the SPY dividend.
The thing is, you guys are making two assumptions about this trade that you don't know to be true. 1. That my broker somehow put the wrong date on the transaction (it says trade date and settlement date as 12/20, not 12/19) and 2. that it was some institutional expert hedge fund algo that exercised when it could have just as easily been some guy over at wallstreetbets thinking if he exercised before market open, he'd get the divy. As of now, there is no reason to expect I have to pay the divy. If I do though, I'll update this post and let you know I was wrong and you were all right, but I'm thinking its the opposite. Just like Ironchef said...the markets are very efficient and it doesn't seem likely that a large broker that processes millions of trades per day would just put the wrong trade date up.
To clear up a few things for you. You don't exercise an option in the morning. Exercises must be submitted to the OCC by 430pm ct. (Most brokers will have an slightly earlier cutoff time) The OCC then aggregates them all and gives the information back to the clearing firms before midnight. This was a huge dividend play. Every institution, market maker and professional trader exercised these calls on Thursday, unless they made an mistake. If you found out Friday morning that you were assigned and didn't have long stock (so you were now short stock) you will owe the dividend. The payout date isn't for awhile, but you should see a pending dividend on your sheets somewhere soon. Not sure about what dates you are seeing for the trade, but if you were short the calls on Thursday, you were assigned short stock and would see it on Friday in your account.
Well, I'll try to remember to look out for that charge. Glad it was only 1 contract though if I do have to pony up.
Either I'm on a different page than you or I don't understand your reference to my comment. The statement by ET180 that I disagree with was: > If you have ITM calls then they will likely get assigned on the prior day provided that the premium left on the call is less than the expected dividend. For example: MO goes ex-div for 84 cents on Tuesday. It closed Friday at $51.13. Here's a random option choice. Assume that the closing quotes are accurate. The just ITM 12/27 $51 call is $0.29 x $0.32. You could sell it for 29 cents. Time premium is 16 cents. Let's pretend that these are late Monday near the close numbers during regular hours. From ET180's premise, exercise call, acquire stock for $51.29 (ignoring cost basis of call). Tuesday morning, MO's adjusted close will be $50.29 which is a loss of $1.00. On pay date, receive 84 cents div for a total loss of 16 cents which was the amount of the call's time premium. Exercising threw away the time premium. OTOH, if the time premium of an ITM put was less than the dividend, then there would be an arb.
Since the dividend is a known event, why wouldn't the dividend also be reflected in the price of the put (in addition to whatever time premium is left in the put) for the same reason you state above? I have seen many of my ITM short calls assigned early before ex-dividend. I have never seen a short-put assigned early before ex-dividend. I have read that it is mostly done for tax reasons, but don't recall the explanation. https://www.thebluecollarinvestor.c...pture-theoretical-and-practical-applications/ https://www.optionsplaybook.com/managing-positions/early-options-exercise/
Of course the dividend is reflected in the price of the put,but it will have a greater effect on the ITM option,the option with the higher delta.Keep in mind we are discussing ITM calls with high delta's. As for Puts being exercised,it's pretty clear why the OTM is never exercised.But why would you ever expect an ITM put to be exercised before the ex div date?? Depending on carry costs,and the value of the "short call",wouldn't it make more sense to always exercise a long ITM put immediately after the stock goes ex div?? Keep it simple..Look at reversals and conversions at different strike prices,differing days till expiration after the Ex Date and perhaps different carrying costs..
Where did I state or imply that? I was responding to spindr0's post 13 above where he stated: I was pointing out that the "buy put" part above should already be priced higher in anticipation of the dividend. You're right that this would only apply to ATM and ITM puts. Should not affect OTM puts.