was i screwed by tradeking?

[rainman050]

ive been playing options for a while on different online accounts and just started using spreads...

so here the issue now..

i was long 1 goog 560 call
i was short 1 goog 580 call

i was up with a net profit of about $800 when i looked at my account yesterday

i had several positions open like this

i logged into my account today and the options are listed as expired for both.. not assigned, not exercised, just expired... and my account has dropped significantly, should i be worried or is everything just supposed to update monday or tuesday?

[Florida]

Originally Posted by rainman050

ive been playing options for a while on different online accounts and just started using spreads...

so here the issue now..

i was long 1 goog 560 call
i was short 1 goog 580 call

i was up with a net profit of about $800 when i looked at my account yesterday

i had several positions open like this

i logged into my account today and the options are listed as expired for both.. not assigned, not exercised, just expired... and my account has dropped significantly, should i be worried or is everything just supposed to update monday or tuesday?

You will probably be O.K., as the options actual expire on Saturday, (today), and any transactions related to this will be shown on the next trading day, (Monday).

However, (and this is a big however), depending on your broker, and what their rules are, they may require you to have adequate funds in your account to allow the assignment. In your situation, $56,000.00. Then, depending on their rules again, if you have the capital in your account to allow for assignment of the stock, they may or may not call it away from you at $580 as the stock did close above that level.

The quote below is a sample that I receive from Tradestation anytime I have an open position going into expiration:

"Your account is holding an option position that expires this week. Please make sure you close out of the option position before expiration if you do not intend to have sufficient assets in the account to cover the cost of an assignment or automatic exercise from an option “in the money.” If the option is “in the money” by 0.05 or more, it qualifies for automatic exercise by the Options Clearing Corporation upon expiration. The market exposure in your account resulting from an option assignment or automatic exercise can be substantial. Therefore, if you choose not to close out an option position that is in the money, please make sure your account has sufficient equity to sustain an assignment or automatic exercise. TradeStation may, in its sole discretion, close out an option position or liquidate stock from a resulting assignment or automatic exercise if the account lacks sufficient equity or as other market conditions may, in TradeStation’s sole discretion, warrant."

This basically states that it is up to them on how it is handled if you do not have sufficient funds to cover the assignment, and you can bet, it will be in their best interest, not yours.

I have always closed all in the money positions prior to expiration for this very reason, I want to have complete control over what happens to my position, and not leave it up to someone else's "sole discretion".

If you had the money in the account to allow for the assignment, then you should be in good shape, either owning 100 shares of the stock at $560 per share, or having it called away from you at $580 per share. If you did not have the funds required to allow for the assignment, then you are kind of at the mercy of Tradeking's policy. You may be able to research their website for the details, or perhaps even get in touch with them if they have any support people available on the weekend.

Good luck,

[rainman050]

thanks for your help

unfortunately they dont have weekend support.. i guess you get what you pay for

one thing thats keeping me optimistic is that in the trade activity.. it shows my long spread call as...

05/19/08 Expired -1 GOP EZ
Call Google Inc Clas $560 Exp 05/17/08
CALL GOOGLE INC CLAS
$560 EXP 05/17/08

05/19/08 Expired 1 GOO EP
Call Google Inc Clas $580 Exp 05/17/08
CALL GOOGLE INC CLAS
$580 EXP 05/17/08


if the quantity is -1, then it must have been executed right?

[Florida]

It may just be the way they show a long call position, vs a short call position, but one can hope.

[mark_brantford]

This got me thinking...so I sent a message to TD Waterhouse and here's the response I got.

All equity options that are five cents in the money at expiry are automatically exercised by TD Waterhouse. As an option trader you must make sure that you are aware of which of your options are in the money. This will allow you to make sure there is enough margin to cover any assigned or exercised options. The margin requirement is the regular margin of the stock.

I'm not 100% sure what this means, I placed a Jun 55 call on IPI, does this mean that near expiry, I have to transfer 2500 into my trading account (I only have 2500 margin available right now) for the option to be exercised, otherwise it expires worthless???

[mark_brantford]

Sorry, meant 3000 in to the account (5500 for 100 55 options, minus 2500 margin available, requiring 3000 new margin to allow for the buy)

[Florida]

Originally Posted by mark_brantford

This got me thinking...so I sent a message to TD Waterhouse and here's the response I got.

All equity options that are five cents in the money at expiry are automatically exercised by TD Waterhouse. As an option trader you must make sure that you are aware of which of your options are in the money. This will allow you to make sure there is enough margin to cover any assigned or exercised options. The margin requirement is the regular margin of the stock.

I'm not 100% sure what this means, I placed a Jun 55 call on IPI, does this mean that near expiry, I have to transfer 2500 into my trading account (I only have 2500 margin available right now) for the option to be exercised, otherwise it expires worthless???

That would only apply if your option is "in the money" at the time of expiration. Right now with the stock at $49, your option is not in the money, so it would not be assigned, (unless of course the stock goes to above $55 by the June expiration).

I have always found that it is best to sell "in the money" options a day or 2 ahead of expiration to get your best return. Also, in most cases, you are buying options to take advantage of the leverage vs having to own the stock, so why would you let it be assigned? Sell the in the money call prior to expiration, or roll it over into a call of a month farther out if you still believe the stock has room to run.

[mark_brantford]

Originally Posted by Florida

That would only apply if your option is "in the money" at the time of expiration. Right now with the stock at $49, your option is not in the money, so it would not be assigned, (unless of course the stock goes to above $55 by the June expiration).

I have always found that it is best to sell "in the money" options a day or 2 ahead of expiration to get your best return. Also, in most cases, you are buying options to take advantage of the leverage vs having to own the stock, so why would you let it be assigned? Sell the in the money call prior to expiration, or roll it over into a call of a month farther out if you still believe the stock has room to run.

1) Well, the idea is for it to be above $55, yes!!

2) I see what you're saying, that the gain overall will be about the same whether I exercise the option or sell the call because by then, if it is in the money, the premium will about balance out any gain by actually letting it be assigned. That does make more sense and would be easier on my account, shifting money around would be a hassle.

I am newer to this, thats why I started out small. Hoping the June earnings bring some good news :P

[netwrangler]

Further to this discussion, I received the following message from Schwab yesterday:



This tells me two things:

1. If I have a covered call position and the call is in the money, I can expect that call will be exercised and my stock shares will be assigned.
   
   
2. If I have an option position of any kind as the expiry date approaches, I need to take a proactive approach to managing that position. The rules that my broker and the CBOE use are, of necessity, one-size-fits-all rules. Those rules will be applied equally to all, but they may not bring about the result I seek in my position. It's up to me to make sure I get the best result.

[wallstreetsedge]

usually the brokerage firm will even let it expire worthless if its insignificant.. what you can also do is if theres a big discrepency, place a sell order to be delivered