-1

If I sell a call option and at expiry, the call is in the money, is it guaranteed that I will be assigned and will need to deliver the underlying? What is the probability of assignment/
My question is that let us say i dont get assigned (since assignment is random) even though the call expires ITM. Then i still get to keep the call premium, correct?

Kinda seems like having your cake and eat it too, where am I going wrong?

3

If you are in the money at expiration you are going to get assigned to the person on the other side of the contract. This is an extremely high probability.

The only randomness comes from before expiration. Where you may be assigned because a holder exercised the option before expiration, this can unbalance some of your strategies. But in exchange, you get all the premium that was still left on the option when they exercised.

An in the money option, at expiration, has no premium. The value of your in the money option is Current Stock price - Strike Price, for a call. And Strike price - Current Stock price, for a put.

Thats why there is no free lunch in this scenario.

  • 'Extremely high probability' that is what i was asking. Thanks. – Victor123 Oct 14 '14 at 20:01
  • 1
    If you expire at strike or very near strike you may not get assigned. Also, you may still get assigned if you're out of the money too (though this is rarer is has happened in large market plays). Options assignment happens when trading is suspended so depending on the option volume near strike the fact that you're in or out of the money at close may not mean that you're in the position when it reopens. – Matthew Oct 14 '14 at 20:24

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .