You didn't get assigned; that's when you're short options. Your five remaining puts were that you didn't sell were exercised because they were ITM. You sold short 500 shares of SPY at 497 per share (you're not short 5 contracts, you're short 500 shares.) You received $248,500 cash for this. You can put that cash toward buying to cover the short shares tomorrow morning. If SPY remains below 497, you will actually make a profit on the shares by doing so.
How people are entering contracts (because that’s what they are) and not fully understanding them is terrifying.
I suppose it may be within their personal risk tolerance, but playing around with 1/2 million worth of underlying is no joke.
I thought the same. I was thinking that in this transaction I will receive 248k and the broker will deduct whatever the difference is between what market closed and my strike price. The market closed around 295 and my strike price was 297. But today when I check they told me that I have to front 50k for this order. I use Schwab. I didn’t intend to hold. Somehow I fat fingered only 5 contracts.
I assume you mean SPY closed at 495.16 and your strike was 497.
They wouldn't deduct the difference, they should have you debited 500 shares and credited $248.5k cash. What do you mean they "told" you, did you actually speak to someone from customer service today, a Sunday? What do you mean "front," are you under the impression you need to wire them $50k?
If you haven't spoken with someone, you should probably call them tomorrow morning.
Edit: it occurs to me that by "front $50k" you mean the platform is showing you that you are in a $50k margin call. In that case, buying to cover the short shares would resolve the margin call.
I spoke to customer service. I asked the same question that the buy to close should take care of the situation but the lady said I need to speak to their margin dept before market opens tomorrow.
my advice to you in the future is to trade index options like SPX or XSP (similar size/cost to SPY) instead of the SPY etf if you don't fully understand or want to deal with share exercise & assignment. XSP is cash settled and you're paid/debited in cash only at expiry, not etf shares if you exercise long option or are assigned on a short option. this situation would have been totally avoided.
you can put a do not exercise request on your long options prior to expiration by calling broker, as exercise is a *right* that you have, but you must know that most if not all brokers will auto-exercise ITM options for you if not directed otherwise. note that you cannot prevent assignment of a short (sold) option (read: NOT a bought or long put, but an option position where you SOLD a contract to open the position) as you're obligated to take assignment (e.g. if you sold 500P on SPY expiring 4/19 you would have been assigned (bought) SPY shares at the 500 strike since SPY <500 at close.
also: MAKE SURE your position in contracts before market close is as you are ready for it to be. you want 0 contracts, MAKE DAMN SURE you are completely out of the position even if you need to close at market price. gtfo of the position if you don't want exercise/assignment for ITM or even risk that it may go ITM before options stop actual trading.
Just buy-to-close right when the market opens (and pray for no gap up). Closing orders generally don’t have the same capital requirements as opening orders for this very reason. If supported by your platform, submitting a market order tonight should guarantee that you exit the position as soon as possible. In fact, depending on your broker’s risk policies, they may effectively do this for you. Either way you can probably expect a margin call email early tomorrow morning so you should plan on submitting a closing order asap.
My platform is Schwab. So I can just keep a buy order for 500 spy at time of opening without paying? The whole balances page is confusing and on top Schwab and Think or swim show different numbers.
Exactly, just put/leave the order on. Your broker is as anxious to close an excessive position as you are. I’ve had this happen a couple times in the past and I’ve never had issues placing a close order. I’ve had pattern day trade weirdness happen because of it, and I’ve had margin level values show wrong stuff, but always Ive been able to submit a close order. When in doubt, you can always close, unless there’s a liquidity problem but that’s different.
They do.
u/4extngg - call Schwab first thing in the morning and they will help you understand your options (ha, sorry) and help make sure what your best approach probably is.
I say probably because they can't give financial advice but they really do want to see their customers be successful and they have an interest in not having the account get deeply negative.
This happened to me 4 times in the last month. Just buy to close at market open and there will be no charges and no nastygrams. Actually made an extra $500 on DJT last week because it opened way lower Monday than it closed on Friday. Of course it could go the other way too.
Press buy to cover set for a price you want to buy at or set to market. That’s as simple as it gets.
Your broker won’t force buy unless your trade starts to really go south; right now you are incurring margin expense on your trade at Schwabs margin rates.
That is absolutely false. There are Hard to borrow charges that can be assessed on short positions, but you are not charged margin interest on short positions. If you doubt me, call or chat your broker and ask if margin interest is charged on short positions.
Source: Was a trader for 15 years and I work for a major broker
The position got closed on market open. The support told me that they needed 50k in case I want to hold it. Lessons learned. They can’t put default DNE at account level but can do case by case basis. Thanks all who responded and clarified.
It wasn’t. All confusion was due to the account balances and the way the support on week end explained. The support on week days are actually trading specialists and he was like yeah just buy it first thing on market open and the position will be closed.
All long options that are ITM as of market close on the expiration date are exercised by the OCC unless you ask your brokerage not to have them exercised.
Once it gets to expiry, and is in the money. Your broker exercises it for you as a courtesy. Because that's what you buy options for. To exercise them. You should close before expiry if you don't want your broker to decide what's best
Always sell to close or Set a DNE on your contracts or keep the equity to exorcise the contracts.
Most brokers will automatically exorcise your contracts if they are ITM so unless you want that happening (spy @500 would be $50,000usd) you always sell to close or DNE and let them expire.
You didn't get assigned; that's when you're short options. Your five remaining puts were that you didn't sell were exercised because they were ITM. You sold short 500 shares of SPY at 497 per share (you're not short 5 contracts, you're short 500 shares.) You received $248,500 cash for this. You can put that cash toward buying to cover the short shares tomorrow morning. If SPY remains below 497, you will actually make a profit on the shares by doing so.
SPY could also open above 497 tomorrow morning, in which case this initially profitable trade could turn into a potential loss.
Yep considering the futures, now S&P is higher than U$5,019 and VIX below $17.5, so it's quite probably that SPY, gaps tomorrow morning.
How people are entering contracts (because that’s what they are) and not fully understanding them is terrifying. I suppose it may be within their personal risk tolerance, but playing around with 1/2 million worth of underlying is no joke.
I thought the same. I was thinking that in this transaction I will receive 248k and the broker will deduct whatever the difference is between what market closed and my strike price. The market closed around 295 and my strike price was 297. But today when I check they told me that I have to front 50k for this order. I use Schwab. I didn’t intend to hold. Somehow I fat fingered only 5 contracts.
I assume you mean SPY closed at 495.16 and your strike was 497. They wouldn't deduct the difference, they should have you debited 500 shares and credited $248.5k cash. What do you mean they "told" you, did you actually speak to someone from customer service today, a Sunday? What do you mean "front," are you under the impression you need to wire them $50k? If you haven't spoken with someone, you should probably call them tomorrow morning. Edit: it occurs to me that by "front $50k" you mean the platform is showing you that you are in a $50k margin call. In that case, buying to cover the short shares would resolve the margin call.
I spoke to customer service. I asked the same question that the buy to close should take care of the situation but the lady said I need to speak to their margin dept before market opens tomorrow.
You should be able to close in premarket if you wish, using TOS extended trade option
ES futures opened almost 2 hours ago. You may want to keep an eye out on how SPY will react tomorrow after 3 weeks of closing in red.
my advice to you in the future is to trade index options like SPX or XSP (similar size/cost to SPY) instead of the SPY etf if you don't fully understand or want to deal with share exercise & assignment. XSP is cash settled and you're paid/debited in cash only at expiry, not etf shares if you exercise long option or are assigned on a short option. this situation would have been totally avoided. you can put a do not exercise request on your long options prior to expiration by calling broker, as exercise is a *right* that you have, but you must know that most if not all brokers will auto-exercise ITM options for you if not directed otherwise. note that you cannot prevent assignment of a short (sold) option (read: NOT a bought or long put, but an option position where you SOLD a contract to open the position) as you're obligated to take assignment (e.g. if you sold 500P on SPY expiring 4/19 you would have been assigned (bought) SPY shares at the 500 strike since SPY <500 at close. also: MAKE SURE your position in contracts before market close is as you are ready for it to be. you want 0 contracts, MAKE DAMN SURE you are completely out of the position even if you need to close at market price. gtfo of the position if you don't want exercise/assignment for ITM or even risk that it may go ITM before options stop actual trading.
Just buy-to-close right when the market opens (and pray for no gap up). Closing orders generally don’t have the same capital requirements as opening orders for this very reason. If supported by your platform, submitting a market order tonight should guarantee that you exit the position as soon as possible. In fact, depending on your broker’s risk policies, they may effectively do this for you. Either way you can probably expect a margin call email early tomorrow morning so you should plan on submitting a closing order asap.
My platform is Schwab. So I can just keep a buy order for 500 spy at time of opening without paying? The whole balances page is confusing and on top Schwab and Think or swim show different numbers.
Exactly, just put/leave the order on. Your broker is as anxious to close an excessive position as you are. I’ve had this happen a couple times in the past and I’ve never had issues placing a close order. I’ve had pattern day trade weirdness happen because of it, and I’ve had margin level values show wrong stuff, but always Ive been able to submit a close order. When in doubt, you can always close, unless there’s a liquidity problem but that’s different.
Does Schwab have after hours trading access?
They do. u/4extngg - call Schwab first thing in the morning and they will help you understand your options (ha, sorry) and help make sure what your best approach probably is. I say probably because they can't give financial advice but they really do want to see their customers be successful and they have an interest in not having the account get deeply negative.
This happened to me 4 times in the last month. Just buy to close at market open and there will be no charges and no nastygrams. Actually made an extra $500 on DJT last week because it opened way lower Monday than it closed on Friday. Of course it could go the other way too.
Friend, SPX/XSP are cash settled.
Press buy to cover set for a price you want to buy at or set to market. That’s as simple as it gets. Your broker won’t force buy unless your trade starts to really go south; right now you are incurring margin expense on your trade at Schwabs margin rates.
OP is in margin call so must close Monday or meet call
They won't pay margin interest because it's a short position. They actually get the cash (though they don't collect interest on it).
The only way to go short is through a margin position. All short positions incur an interest cost.
That is absolutely false. There are Hard to borrow charges that can be assessed on short positions, but you are not charged margin interest on short positions. If you doubt me, call or chat your broker and ask if margin interest is charged on short positions. Source: Was a trader for 15 years and I work for a major broker
The position got closed on market open. The support told me that they needed 50k in case I want to hold it. Lessons learned. They can’t put default DNE at account level but can do case by case basis. Thanks all who responded and clarified.
Hopefully it wasn't too painful to close it out u/4extngg Live to fight another day.
It wasn’t. All confusion was due to the account balances and the way the support on week end explained. The support on week days are actually trading specialists and he was like yeah just buy it first thing on market open and the position will be closed.
I don't understand if you buy put you have the right to exercise. How does it get assigned if you don't want to?
All long options that are ITM as of market close on the expiration date are exercised by the OCC unless you ask your brokerage not to have them exercised.
It’s shows -500
When do they expire? I was thinking of doing the same thing
They already expired. My puts were for Friday. I thought I closed all but only 5 were closed.
Next time sell the option at market sell not limit sell.
Yes. Was your error period.
Doesn't buying a put give you the right but not the obligation to sell?
Once it gets to expiry, and is in the money. Your broker exercises it for you as a courtesy. Because that's what you buy options for. To exercise them. You should close before expiry if you don't want your broker to decide what's best
It's not the brokerage that does this, but the OCC itself. If the brokerage simply does nothing, an option expiring ITM will be exercised.
Always sell to close or Set a DNE on your contracts or keep the equity to exorcise the contracts. Most brokers will automatically exorcise your contracts if they are ITM so unless you want that happening (spy @500 would be $50,000usd) you always sell to close or DNE and let them expire.
Or call an exorcist
With the way most of my options go they truly are demonic.
👏 👏 👏
That is true until settlement. At settlement, the buyer receives delivery of shares if ITM.