Weekend Updates

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    Posted: 18 August 2012 09:11 PM #91

    Phoebear611 - 19 August 2012 12:04 AM

    Similar thing happened to me except I missed it and over that particular weekend they exercised my in-the-money calls.  Thank God the stock was up when I realized what had happened.  Made about half a point but almost passed out in the interim.

    What am I missing?

    Is there some kind of default option to exercise?  I thought you specifically had to make an election when a regular call expires in the money.

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    Posted: 18 August 2012 09:15 PM #92

    Mav - 18 August 2012 11:57 PM

    That’s hilariously…awesome.  :bugeyed:

    Am I missing something here?  Aside from winning the Friday lottery, your dilemma would be choosing to buy $648,000 in AAPL at a slight discount LOL or just letting your option expire, because you _are_ talking _American_ option/exercise rules, right?  We’re talking regular ol’ CBOE options, aren’t we?

    They were ITM enough to trigger automatic exercise, so I would have wound up with the shares, a negative $643,000 debit balance, and heart failure.  If I still wasn’t paying attention and didn’t happen to notice shares and debit balance, the brokerage would liquidate…and if the stock happened to drop such that the sale didn’t cover the debit balance, they’d liquidate other holdings in the account.  Did I mention this is a tiny little IRA rollover account?!?!?!  Aaarrrrrrggggghhhhhh!

    Penalty box.

         
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    Posted: 18 August 2012 09:18 PM #93

    Sounds like a fun Friday.  :D

    I should talk to my broker about auto-exercise on Monday.

    In the meantime, hey, you made anywhere from pretty good to serious money on the trade.  So go nuts, beat yourself up with all those crisp dollar bills.  LOL

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
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    Posted: 18 August 2012 09:30 PM #94

    lovemyipad - 19 August 2012 12:15 AM
    Mav - 18 August 2012 11:57 PM

    That’s hilariously…awesome.  :bugeyed:

    Am I missing something here?  Aside from winning the Friday lottery, your dilemma would be choosing to buy $648,000 in AAPL at a slight discount LOL or just letting your option expire, because you _are_ talking _American_ option/exercise rules, right?  We’re talking regular ol’ CBOE options, aren’t we?

    They were ITM enough to trigger automatic exercise, so I would have wound up with the shares, a negative $643,000 debit balance, and heart failure.  If I still wasn’t paying attention and didn’t happen to notice shares and debit balance, the brokerage would liquidate…and if the stock happened to drop such that the sale didn’t cover the debit balance, they’d liquidate other holdings in the account.  Did I mention this is a tiny little IRA rollover account?!?!?!  Aaarrrrrrggggghhhhhh!

    Penalty box.

    How would that “auto” exercise trigger without the margin to cover it?

    I say this as someone who just got auto-exercised for the first time recently. 1000 shares. On margin.

    Fortunately, they were 585’s.

    “I’d rather be lucky than good.”

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  • Posted: 18 August 2012 09:54 PM #95

    Mav - 19 August 2012 12:11 AM
    Phoebear611 - 19 August 2012 12:04 AM

    Similar thing happened to me except I missed it and over that particular weekend they exercised my in-the-money calls.  Thank God the stock was up when I realized what had happened.  Made about half a point but almost passed out in the interim.

    What am I missing?

    Is there some kind of default option to exercise?  I thought you specifically had to make an election when a regular call expires in the money.

    American style options are automatically exercised if they are in the money…if it were “European Style” then you would have to prompt the brokerage firm to do it but equity options are all american style.  The only time you make “an election” to exercise is if you do it BEFORE maturity - but AT MATURITY it is automatic.

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    Posted: 18 August 2012 09:57 PM #96

    JDSoCal - 19 August 2012 12:30 AM

    How would that “auto” exercise trigger without the margin to cover it?
    (...)

    You have until settlement to cover the cost.  If by then you don’t have the cash or margin, they’ll liquidate to cover the debit balance and fees.

         
  • Posted: 18 August 2012 09:59 PM #97

    I’m pretty sure if you read the Options Agreement Form it says it in there (about the exercise provisions)...wouldn’t bet my life on it but I’m pretty sure.  It happened to me (I’m embarrassed to say) with IBM as well.  Now I am extra- double probation - careful!

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    Posted: 18 August 2012 10:02 PM #98

    lovemyipad - 19 August 2012 12:15 AM

    Did I mention this is a tiny little IRA rollover account?!?!?!  Aaarrrrrrggggghhhhhh!

    Penalty box.

    In iPad parlance, “tiny little” equals 7 figures.  :-D

         
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    Posted: 18 August 2012 10:29 PM #99

    *reads up on the subject*

    So the Options Clearinghouse Corp. _does_ have an auto-exercise policy.  Good to know.

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
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    Posted: 18 August 2012 10:51 PM #100

    Way to go iPad, always good to heat that I have company in the penalty box. Next time let me know and I’ll bring some chips and salsa! (unhinged a spread Thurs, got distracted and missed the rehinge and cost me some $ Friday). Luckily nice AAPL up days mitigate the random lack of focus. Glad.it turned out in your favor. Good Karma paying off grin

         
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    Posted: 19 August 2012 12:24 AM #101

    lovemyipad - 19 August 2012 12:05 AM
    Mav - 18 August 2012 11:29 PM

    OK, found the original post, so I’m clear on it again.  Mercel actually quoted the tweet from Zaky, not RG:

    Mercel - 17 August 2012 02:50 PM

    I was referring to this earlier in the week:

    From Bullish Cross (Andy Zaky) on Twitter:

    ?I think Apple will top out tomorrow after the open.  I think we could see $632 to $633 in the AM.  We could get a test of the highs?. (Presumably 644)

    ?Yet, after testing the highs, the stock will see a much larger pullback.  After that, we will see another rally to take out the highs.?

    The market call was a little off.  No big deal.  It’s the note from Zaky that doesn’t quite jive:  http://tech.fortune.cnn.com/2012/08/17/apple-hits-a-new-all-time-high-of-636-54-in-fear-driven-rally/ 

    IMHO, there’s dissonance between Twitter - “much larger pullback”, client note - “700 could be coming much sooner than expected”.  Just a change of position?

    Yeah, “much larger pullback,” very likely has a different interpretation if you aren’t following Bullish Cross.  “Much larger” to me means more than 10 points (which is what we had from 638 to 628).  It doesn’t necessarily mean 50+.  Usually, there is more resistance at key resistance, but we had far more resistance in that 620 area…this 640 area wasn’t much of a barrier.

    He expected more of a pullback-slingshot through 644, catapulting up toward 700, which probably would have been healthier since now we’re going to hear the “p” word again…

    Anyway, nothing incongruous in the messages to me.  Ever since we took out 620, he expected a run for 700…just not sure HOW we get there.  It’s like chess.  Many different ways it could happen, but Mr. Market always gets the pivotal moves.


    First off, Mercel was quoting my post, which had that blurb about Andy Zaky expecting a pullback on Wednesday after AAPL tested the highs. He was sort of right since we did pullback from 638 to 627 and change, but I expected more of a pullback than this, as did Redler, who thought we could see 619-620. 

    On Thursday, AZ went short on both the SPY and QQQ, but said nothing about AAPL.  This could have been hedging of his AAPL position, or maybe it was in line with his expectation of a steeper pull-back in AAPL; I don’t know, because all I have is his Twitter feed, and not paid subscriber access to Bullish Cross.

    [ Edited: 19 August 2012 12:50 AM by rutgersguy92 ]      
  • Posted: 19 August 2012 12:47 AM #102

    As for option exercise, the short leg of my 6 Sep 12 BCS 550/560 was called possibly for the dividend.
    10 shares of AAPL I bought the day after SJ passed away was called away and I had planned to never sell those 10 shares :-(

         
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    Posted: 19 August 2012 01:00 AM #103

    Huh?

    You have a BCS.  Exercise the long calls against the short calls - you “won the game” because you now have full value on the BCS for as many short calls as were exercised.  It’s not like those 10 shares would be enough to fill the call exercise anyway.  You should get in touch with your broker about this ASAP.

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    AFB Night Owl Team™
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    Posted: 19 August 2012 01:08 AM #104

    lovemyipad - 19 August 2012 12:57 AM
    JDSoCal - 19 August 2012 12:30 AM

    How would that “auto” exercise trigger without the margin to cover it?
    (...)

    You have until settlement to cover the cost.  If by then you don’t have the cash or margin, they’ll liquidate to cover the debit balance and fees.

    According to Schwab, they will only do it if you have margin enabled and can cover the trade within your margin limits. Hard to understand why any broker would do it otherwise, especially in an IRA where you have contribution limits.

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    Posted: 19 August 2012 01:14 AM #105

    Mav - 19 August 2012 04:00 AM

    Huh?

    You have a BCS.  Exercise the long calls against the short calls - you “won the game” because you now have full value on the BCS for as many short calls as were exercised.  It’s not like those 10 shares would be enough to fill the call exercise anyway.  You should get in touch with your broker about this ASAP.

    Mav is absolutely right. I had the same thing happen in a divvy capture play.  If you had acted fast enough you could have had the purchased shares cross with the called shares and avoided a basis change on your original shares..

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