40
It costs you $584.9 x 100 = $58,490 to buy the put option.
You would instantly make $80,000 - $22500 - $58,490 = -$990
15
If I buy a put option (which would be an option to sell stocks as far as I understood), who will provide the stocks to sell if I decide to exercise it? Should I have/provide the stocks or is it the option writer who provides them? And at what price would they be provided?
A put gives the owner the right to sell the stock at the strike price. If you ...
6
Notwithstanding the activity over the last weeks, do you think Melvin as an entity, Plotkin, Ackman, Dalio, or the great Buff man care who specifically is on the other end of a trade, ever? Have you ever cared about whether the share you just bought was sold to you by a nearly destitute widow about to be out of money? You have no fiduciary duty over Melvin's ...
5
This is one of those things that comes around sometimes in the market and is the number 1 risk of shorting stocks - a short squeeze.
To recap really quick as others have already stated, shorting a stock is where you borrow it from someone else, sell it in the market and then hope to buy it back at a lower price later thus making profit: Borrow at 10, sell at ...
5
The analogy with a denial of service attack is weak at best. The activity involved did not cause anyone a denial of service. Instead, the risk of counter-party bankruptcy caused the intermediaries to require 100% collateral. Essentially, Robinhood and TD Ameritrade would become liable for all losses instead of the hedge fund should the hedge fund seek ...
5
A long put gives you the right to sell the stock at the strike price.
The 2/05 '21 $800 put costs $584.90. You have the ability to sell the stock for $800 and based on your quoted price of $225, the counterparty agrees to overpay you $575 if assigned. That is called the intrinsic value of your put option. Since your put costs $584.90, you are also paying $...
4
It's not clear why you are comparing buying one share with taking a synthetic long option position which would be for 100 shares.
A synthetic long position is when you sell a short put and use the proceeds to buy a call at the same strike. Since call premiums are usually higher than put premiums for at-the-money strikes, this can usually be done for a ...
3
No
are investors on the other side of the trade acting as barriers/exploiters of the goodwill?
Nobody is trying to squeeze GME because they think charities are easy targets or some sort of nefarious purpose. Now, if certain charities have placed funds into hedge funds that undertake risky trades, that's entirely an issue between those charities and their ...
3
You can sell an expiring equity option until 4 PM EST on the day of expiration.
What your option will be worth tomorrow morning will depend on the price of GME, how early in the morning GME rises (if it rises) and what the implied volatility will be at that time (IV is all over the map for GME). Based on today's closing quotes, you should be able to break ...
3
When you establish a new option position it is either:
Buy to Open (BTO) or Sell To Open (STO)
When you close an existing option position it is either:
Buy To Close (BTC) or Sell To Close (STC)
A closing position cancels an opening position. In other words:
BTO + STC = no position
STO + BTC = no position
So if you sell to open a put and it is assigned (...
3
An in the money option will be exercised at expiration. In your case, you would find yourself short 100 shares.
At that moment, you sold 100 shares for $100 (each share) and the stock can be bought for $98. You've recouped $200 of your $400 cost, but lost $200.
By not completely closing out the position and actually covering, you are at risk should the stock ...
2
I don't know what they are right now because GME is halted but in the past week, bid/ask spreads have been wide for GME options. That's a small reason why your put may not be increasing as fast as you'd like.
The major reason is that options gain in value when implied volatility increases and they lose value when implied volatility decreases. So if there'...
2
Option premium decay is non linear so you receive more premium per day for writing nearer term options. For ATM options, a loose rule of thumb is that the premium for ATM options is related to the square root of the time remaining. In general, that's why writers tend to sell nearer weeks/months and buyers tend to buy further out weeks/months.
A nearer expiry ...
2
I have heard that they can use options to cover their short positions. But to me (I don't know a lot about trading), it seems like these options would leave another seller short a share, so float wouldn't decrease.
Options can be used to acquire shares or sell shares but they do not circumvent the rules for shorting.
If I am short the shares and long a call,...
2
The amount of protection that a put provides depends on how effective you want it to be, somewhat like collision insurance on a car (U.S. centric). The larger the deductible, the lower the cost of the insurance.
Premium decay is non linear so the longer the duration of the put, the cheaper the cost is per day.
An at-the-money put for Dec '21 (the furthest ...
2
A long call gives the owner the right to buy the stock at the strike price. As the seller, you are obligated to sell the underlying at the strike price.
If your short call expires in-the-money, you must deliver the shares if you own them. If you do not own them and if they are available, your broker will borrow them from another account and deliver them to ...
2
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 (...
2
The Wheel Strategy is yet another situation where someone takes two equivalent strategies and needlessly fabricates a new name for alternating back and forth between the two strategies. To grasp this, you need to understand that short puts and covered calls (same strike price and expiration) are synthetically equivalent strategies, meaning a similar P&L....
2
If an option has remaining time premium, it makes more sense to sell it to close because doing so will incur less frictional costs than exercising. One transaction and you're done. Also, if you exercise, you throw away that time premium.
When options are deep in-the-money, they often trade below parity (the bid is less than the intrinsic value) and if you ...
2
It does apply to puts as well. The difference with Puts is that it it more common (though still relatively rare) for early exercise to be a better option that selling the option.
But it's still much more common for selling a put to be better than early exercise. You would only exercise a put when the "interest" earned on the option (meaning the ...
2
There should be a spike (or various spikes) of $800 where these contracts were exercised.
No there shouldn't. Option exercises do not go through the exchange's open outcry (bid/ask) process and so do not show up on the trade price history. They are direct exchanges, probably through a clearing house, but I am unfamiliar with these specifics (I don't think ...
2
This reminds me of someone sitting behind the class idiot in school and copying his answers to an exam. The end result is that both get it wrong, as did both of your linked articles.
There is no unlimited loss possibility in a Synthetic Long Stock option strategy. While the potential loss could be substantial, it is limited to strike price plus the net ...
2
You can be assigned at any time when you are short an in-the-money option but that is unlikely if the option has any remaining time premium. The exception to this general rule would be if there is a pending dividend and the dividend exceeds an ITM put's time premium (not true for a call).
You can buy to close your short put at any time, ending your ...
1
When you sell a covered call, the buyer gives you a premium for the right to purchase 100 shares of your stock at the strike price until the expiration date. The entire premium is yours to keep if you are assigned (the buyer exercises his call and you must sell) or the call expires worthless in May.
If you purchase stock XYZ for $15.75 and sell a May 2021 $...
1
With no ticker cited, I'd suggest -
The option wasn't exercised, it was sold. i.e. the option seller bought it back.
The volume caused by option execution didn't create enough volume to move the market.In general, the open interest goes down as expiration approaches, for multiple reasons, so the final Friday executions are low compared to the natural volume....
answered Feb 5 at 11:33
1
American style options (equities) can be exercised any time before expiration. European style options (most indexes) can only be exercised at expiration.
The OCC automatically exercises all options that expire one cent in-the-money. However, to be sure, exercise by 5:30 PM on the expiration date.
Read the following for the technical details:
Expiration ...
1
You have to exercise the option at the time of expiry for a European option, or anytime before or at expiry for an American option. Most equity options are American, so you can exercise anytime before or at expiry, but not after.
At expiry, if you don't specify anything through your broker, the options clearing house will "auto-exercise" your ...
1
Open interest declines for three reasons:
Option expiration
Option exercise
A pair of closing option transaction (one counterparty buys to close and the other sells to close and the contract ceases to exist).
Since it expires today, I know for sure it hasn't expired yet. So some of the open interest must have been exercised, which means somebody sold ...
1
What if it was a wash sale where I sold in my regular account and re-bought in the IRA?
You can't harvest loss. From https://www.investopedia.com/articles/retirement/09/ira-wash-sale-rule.asp (mirror):
In 2008, the IRS issued "Revenue Ruling 2008-5," in which it addressed the question of whether the wash-sale rules apply to IRAs. In the ruling, ...
1
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 ...
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