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  1. I own 100 shares of XYZ.

  2. I sold a call option on XYZ at a strike of $100.

  3. I bought a call option on XYZ at a strike of $110.

  4. The price of XYZ expired at $120.

Will my 100 XYZ shares be sold and a another set of 100 XYZ shares be assign to me?

This matters for tax purpose I believe.

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  • What price did you originally pay? This also matters for tax purposes, specifically whether selling and rebuying will create a "wash sale".
    – Ben Voigt
    Feb 1, 2021 at 23:32

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One of the two sets of shares will be sold, obviously - either the one you had before, or the one you get from exercising your call. And yes, this can have impact on your taxes, potentially triggering a capital gains tax.

However, most brokers allow you to specify which 'bundle' of shares you'd like to have sold - typically for one or two days afterwards (but it must happen before settlement). So simply log on to your account after the trading and exercising happened, find the respective transactions in the log, and edit the affected share block to your liking.
If your broker doesn't have this option on the website, call them (but again, before settlement!), and ask them to adjust it - and maybe change brokers.

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  • Unless there's significant slippage, the better option is most likely to close the credit spread prior to expiration and avoid this headache.
    – Hart CO
    Feb 2, 2021 at 0:01
  • Sure. But he didn't ask if his is a good plan; he asked what will happen if he does it. Also, the share price might run up after hours, so the options were worthless at 4 pm, but ended up being executed at 4:30. Happened to me.
    – Aganju
    Feb 2, 2021 at 0:04
  • Right, they didn't ask how to avoid the original shares being sold but it was prudent to include that in your answer. I just tacked on an even easier way to do so. Lots of things to consider.
    – Hart CO
    Feb 2, 2021 at 0:08
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Yes your shares will almost certainly be sold because you are short the call @100. You have the option, but not the obligation, to execute your call @110.

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  • That was not the point of the question.
    – Aganju
    Feb 1, 2021 at 23:58
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When you are assigned on the short $100 call, your 100 shares of XYZ will be sold shares at $100.

If you do not sell your $110 call to close, it too will be assigned and you will buy 100 shares of XYZ at $110. You can designate to the OCC via your broker that you not be auto exercised at expiration on your long call but that would be foolish since it is worth $10.

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  • That's not his point either - I think he wants to know if if the exercise-assigned shares or the pre-existing ones get sold, and more importantly, if he has any say in it.
    – Aganju
    Feb 2, 2021 at 0:00
  • It's pretty obvious what will happen. The first sentence clearly states that his shares will be sold at $100. He will buy shares at $110 if he does not sell to close his long call or designate that it not be auto exercised. The reason for this is that he will receive two separate assignments. For tax purposes, the shares sold will only be at $110 if he can designate the lot sold after assignment. If he does nothing, it will be as stated.
    – Bob Baerker
    Feb 2, 2021 at 0:49

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