Tag Archives | GOOG calls expiration expire worthless naked options selling naked calls covering worthless options expiring options

Q & A. Must I buy those ‘worthess’ options

I'm adding an extra post today because I believe this is an important issue.  Especially on expiration day.


A Rookie Question: I sold 4 GOOG 560 Oct expiring naked calls recently, and
now its going to come down quite a bit today. I think  it
might get down to 0.10 or even 0.00 (as long as GOOG does not go above 560. Do I
still have to buy it back?

What if at the end of the day GOOG stays about $558
and I still get assigned with the option. I will have to come up with $400X558
(whatever that is) to give this person his shares. Can someone do that? I mean
can someone ask for buying the shares although the market value of the shares is
below the strike.

Lets say I wanted to buy GOOG on Friday and didn't get filled.
An on Sat I thought well…lets just get it through the guy who sold me the call
option at $560. In that case I will have to find a lot of money and buy shares
and give him that.

Could this be possible? ….Am I making any sense


Good morning.

Have to buy it back? You NEVER have to buy it back. You are allowed to let
the options expire worthless. But be warned, some brokers will force you to buy
the options today. They do not allow any customers to own a position that can
result in a margin call – due to an exercise. You would have to ask your broker
if you are allowed to watch the options expire worthless.

If you are truly a rookie, why are you selling naked call options? Why does
your broker allow that? It's a pretty risky strategy.

GOOG is up to the mid 540s before the market opens, and the market futures
are lower.

If this market turns around – and I am not saying it will – GOOG
could easily run past $560. Far higher.

It may be a 'waste' of money, but I would certainly pay $0.05 or $0.10 to get those options out of your account.

My guess is that the price will be higher early in the day, but if you want to
buy them – enter an order now, before the market opens. a LIMIT order, never a
market order.

If you don't want to 'waste' the money, you are NOT obligated to buy them

NO. You are not buying the stock, and don't need cash. You need assets to
meet the margin requirement. You would have a short position of 400 shares. I'm
sure you cannot meet the margin requirement for that, and your broker will force
you to buy the stock on Monday. Why take that risk. Who knows what the price
will be at that time.

There is almost zero possibility that you will be assigned if GOOG is less
than $559.99. Buy yes, someone can do that. The call owner has the RIGHT to buy
the stock at any time prior to expiration. The actual stock price determines
whether the call owner will elect to buy the stock at the strike price. But, no
one can prevent the person from exercising. It's his/her option and you have no
voice in determining if/when the option will be exercised.

Yes, you are making sense. But, Saturday is too late to exercise the option.
This afternoon is the deadline.

Don't take this wrong: If you do not understand how this works, if you don't
understand the risks you are taking when you sold those options, why did you
make this trade? This is important: Please understand all the risk and reward
potential for any trade BEFORE you get involved. It is not a trivial matter.


Read full story ยท Comments are closed