SPXU and ex-dividend

[cuegis 683]

I'm hoping someone can help me with this.

Normally this would be a no brainer but IB has given me confusing info.

Over the past 2 weeks I have bought SPXU Jan 18 calls ranging from 48-53 when they were OTM.

With the move over the past few days from $50- $54, as all of long calls went in the money, and since SPXU is the reverse of the S&P's, as the price went up ( as S&P's plummeted), the skew expanded to the upside, so I sold $60-$63 calls to lock in some profits. This basically leaves me with $10 -$13 wide long verticals.

 

Anyway, with SPXU around $53.50, my position is long Jan 50-54 calls, and short Jan 60-63 calls.

I just received the usual, routine email from IB telling me that SPXU is going ex-dividend on Dec 26 with the projected dividend of 0.18485.

Obviously , with IV at 100, there is a LOT of extrinsic value in all of these options.

Under normal conditions the notice would say "it is not economically beneficial to exercise the options, and as far as the short options , which are $7-$10 OTM, with a lot of premium in them, there would be no chance of those being exercised....

 

But, I have never seen anything like this before.

This is the indication that IB is giving about this situation......

 

"Options for which the benefit of early exercise or likelihood of early assignment cannot be projected (e.g., due to uncertainty as to dividend amount, corporate action or an underlying stock halt):"

And it lists all of the options, ITM (long), and far OTM (short) that I'm holding as part of this statement.

 

I always get nervous when I don't know about something and I receive info that I don't understand.

Is there something unique about SPXU where normal exercise rules are different?

 

Any help would be appreciated.

 

As you can see from the notice, all of the boxes that should normally include all options where exercise is not economically beneficial are all left empty.

All of the options, long and short, are included in the box I mentioned above.......

You see all of the boxes are empty except for the last one at the very bottom.

It dosn't make any sense to me.

Maybe I should just close everything out before ex-div day just to be safe......

 

Long options for which early exercise is projected to be economically beneficial:

Symbol	Quantity	Projected Dividend	Estimated Total Benefit	Currency	Ex-Dividend Date	Account(s)

Long options for which early exercise is NOT projected to be economically beneficial:

Symbol	Quantity	Projected Dividend	Currency	Ex-Dividend Date	Account(s)

Short options projected as likely to be assigned early:

Symbol	Quantity	Projected Dividend	Currency	Ex-Dividend Date	Account(s)

Short options projected as unlikely to be assigned early:

Symbol	Quantity	Projected Dividend	Currency	Ex-Dividend Date	Account(s)

Options for which the benefit of early exercise or likelihood of early assignment cannot be projected (e.g., due to uncertainty as to dividend amount, corporate action or an underlying stock halt):

 

Since there is no way to delete this post I'll just follow up by saying that I called IB about this and they said that it was a routine , ex div. email notification, and to make my decisions, and treat it as I would any "normal" stock.

 

I still have no idea why they didn't put these options in the normal box which says "not economically beneficial to exercise"...for my longs, and "no risk of assignment" for my deep OTM shorts.....

With IV at 100, there are "dollars" of extrinsic value, even in the $10 OTM calls.....

And why are they saying "cannot be projected".......even a 5 year old could project this!

 

 

 

 

 

 

 

 

 

 

 

Edited December 21, 2018 by cuegis