Marau 4 Report post Posted May 17, 2015 Hi all Last friday I was assigned (TOS) a Spy May15/212.50 short Call. The stock closed at 212.44, so the option was OTM. Can anyone explain how this is possible to happen and why? Thks. Share this post Link to post Share on other sites
Kim 7,943 Report post Posted May 17, 2015 I must say this is very strange to be assigned option which is OTM. When did you get the assignment notice? Was it on Friday morning or Friday after the close (basically Saturday)? Share this post Link to post Share on other sites
Marau 4 Report post Posted May 17, 2015 The assignment notice reached me yesterday, Saturday. Share this post Link to post Share on other sites
Kim 7,943 Report post Posted May 17, 2015 Okay, so that means that someone submitted it on Friday afternoon, maybe when the stock was slightly above 212.50. And it was assigned because the stock traded slightly above 212.50 in AH. I always recommend to close those options before the market close on Friday not to take assignment risk. Personally, I would close them much earlier than that, to avoid gamma risk. 1 Share this post Link to post Share on other sites
Optrader 128 Report post Posted May 18, 2015 I agree. OTM does not mean it cannot be exercised ? It can still be exercised if the owner feels that there is impending weekend news that can make the stock market move and gap up / down by Monday open. It can also be part of a spread order and owner if he looses that strike, would be vulnerable for gap/up/down move on monday morning. By exercising his rights, he can can still be in a spread trade ( stock + option ) as opposed to be legged out. I have made a part of my overall strategy to never let a short or long option expire worthless. Close it out before expiration. There was a very good article on how a large profit / loss occurred even after expiration friday trading day. Share this post Link to post Share on other sites
