My 2018 primer, Selling Options...Simply Called and Simply Put, targets 3 groups: investors that are new to option trading, Series 7 exam students, and stockbrokers who passed Series 7 but lack good understanding of option trading (for 8 years, I was one of them). But this blog is helpful to investors and stockbrokers with all levels of option trading experience. My posts offer a pithy, first person style that I have used since 1995 to lessen their option trading angst.
Friday, July 27, 2018
Why the early assignment of a DIA call against me?
Despite my vigilance against early call assignments (see my previous post), I received one on 7/19/18, the day before option expiration Friday. On 7/2/18, I had sold the DIA July $245 call against my DIA shares, when DIA traded for $241.03. (DIA is the ETF that holds the 30 stocks of the Dow Jones Industrial Average.) On 7/19/18, DIA closed at $250.79, over $5 in the money. I had planned to visit the position on 7/20/18, option expiration Friday, to consider a one month repair (roll out) to an August call, to avoid the July assignment (e.g., buying back the July $245 call & selling the August $253 call). When I visited the position on July 20, I was surprised to find that my DIA call had been pre-maturely assigned the night before, forcing me to sell my DIA. I had presumed that DIA's ex-dividend date on its 32 cent monthly div was August 1. However, DIA goes ex-div on the 3rd Friday of the month (July 20), & I was assigned the day before, ensuring that the buyer receives the div along with the cheap ETF.
Subscribe to:
Post Comments (Atom)
Thank you James for the kind words & pardon my delayed reply to you. You might enjoy today's post. Don't hesitate to comment & share. Retired from Fidelity for 4 years & missing work a tad, I may begin teaching option selling.
ReplyDelete