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I own 100 shares of AAPL an I am short the Oct 9 2020 $117.50 call. As per this CBOE link, the long holder may exercise that contract at any time before the contract expires, up to and including the Friday before its expiration. What would be the last time to receive an expiration notice?

I would like to open another short call today. When could I roll my AAPL call without fearing that AAPL will surge beyond $117.50 today and my second short AAPL call induces a margin call due to being uncovered? 16:00 EST (end of trading)? 15:55 EST? I don't want to close the current short call. I want to let it expire worthless and avoid the commission.

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It doesn't matter what the last time to exercise is because the OCC exercises all options that are one cent or more ITM at expiration (Exercise By Exception) unless the option owner provides a Do Not Exercise order to his broker. And since you are short the call, that has no relevance to you. You will be assigned if ITM.

With AAPL at $116, your $117.50 call is now 13 cents. You can watch it all day or you can roll it now. Option trading ends at 4 PM EST so that is the cut off time for rolling your option.

I would like to open another short call today. When could I roll my AAPL call without fearing that AAPL will surge beyond $117.50 today and my second short AAPL call induces a margin call due to being uncovered? 16:00 EST (end of trading)? 15:55 EST? I don't want to close the current short call. I want to let it expire worthless and avoid the commission.

There are several problems with this. First, rolling means closing the existing position and opening a subsequent position, either by legging out and in or by using a spread order to achieve both transactions in one fell swoop. The spread is preferable because you can work the price and you will not subject yourself to directional risk as you leg in/out.

Selling a second short call while the first one is open means that you have one naked call in order to earn 13 cents and avoid a commission is not a clever thing to do because options can be exercised until 5:30 PM. If AAPL surges, you'll pay a hefty price for that endeavor (loss on the naked call).

If you sell a naked call, you must meet the option's margin requirement (approximately 20%). Doing so will not create a margin call unless the unfathomable happens and AAPL skyrockets and you have insufficient margin in your account.

If you're going to chase 13 cents, I'd suggest that you either let the today's expiring call expire and sell the next call Monday morning or preferably, watch the position and let the 13 cents evaporate, assuming AAPL doesn't exceed $117.50 by 4 PM. Then, late in the day, use a spread order to roll to your next expiry.

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  • I was wondering B.B., does options trading always end at exactly the same time as shares trading (I guess 16:00), or is it more tricky than that?
    – Fattie
    Oct 9 '20 at 15:33
  • Options on a number of ETFs and ETNs trade until 4:15 EST Oct 9 '20 at 15:40
  • Thanks. Lets assume AAPL surges to 125. If anoption is exercised at 5:30PM EST, how could I buy 100 AAPL shares to cover the call? Afterhours don't provide the necessary liquidity.
    – Bython
    Oct 9 '20 at 17:00
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    @Bython - After hours is the only place to transact and liquidity and price are what they are. No way to get around that. Again, why would you risk a loss on a naked call when your current short call is down to 8 cents and will be buyable for pennies after 3:45 PM if AAPL is below $117.50 ? In such positions as covered calls, it's appropriate to evaluate rolls before expiration. If the premium per day for a later expiration exceeds that of the current position, roll it. Don't try to squeeze the last nickel or dime out of the position, missing the bigger picture. Oct 9 '20 at 17:30
  • thanks, funny thing AAPL surged in after hours and I got assigned. Exactly the second worst case scenario happened.,,
    – Bython
    Oct 10 '20 at 2:44

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