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Post by trenddiver on Dec 19, 2015 1:49:06 GMT -5
I wonder how many longs who had sold covered calls found that their shares were called away. It seems that the short squeeze is not happening because of the huge amount of low strike price calls available at this share price level. Shorts don't seem to have any problem finding available calls to buy to cover. Do all calls have to be covered or is the sale of naked calls are permitted?
Trend
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Post by suebeeee1 on Dec 19, 2015 5:08:48 GMT -5
Longs selling calls for $1.00 when their costs are considerably higher?. Don't think so. Maybe HFT or dark pool trading. Not longs.
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Post by dreamboatcruise on Dec 19, 2015 16:17:35 GMT -5
I wonder how many longs who had sold covered calls found that their shares were called away. It seems that the short squeeze is not happening because of the huge amount of low strike price calls available at this share price level. Shorts don't seem to have any problem finding available calls to buy to cover. Do all calls have to be covered or is the sale of naked calls are permitted? Trend Most brokers have different levels of option trading approval. You have to fill out a form and say how much experience you have trading different types of options. I'm sure many people (not upstanding lizards) lie on these forms... but it's a cover their butt exercise for the brokerages. Writing naked calls requires the highest level as that is about as risky as options trading gets with infinite potential theoretical loss. I applied for the highest approval level with my main trading account, but I've never written a simple naked call. Of course one can write a call at a particular strike and buy one at a higher strike. I'd still consider that writing a naked call, but limits ones potential losses. |
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Post by cretin11 on Dec 19, 2015 19:32:50 GMT -5
I assume OP is referencing $1.50 calls? If so, why would they have gotten called away, since share price ended at 1.48?
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Post by trenddiver on Dec 20, 2015 11:38:28 GMT -5
I assume OP is referencing $1.50 calls? If so, why would they have gotten called away, since share price ended at 1.48? I'm assuming that the holder of the calls was short and wanted to cover. Thus he could exercise the calls and deliver shares back shares. The holder of the call option can exercise even if it financially disadvantageous to do so. In this case, its an easy way to cover without impacting the SP and the difference between $1.48 (which btw was the bid) and the option price of $1.50 wouldn't discourage the holder of the call not to exercise the calls if he was desirous of closing out a large short position quickly and with certainty. |
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Post by bretzyboy on Dec 20, 2015 12:52:47 GMT -5
I assume OP is referencing $1.50 calls? If so, why would they have gotten called away, since share price ended at 1.48? I'm assuming that the holder of the calls was short and wanted to cover. Thus he could exercise the calls and deliver shares back shares. The holder of the call option can exercise even if it financially disadvantageous to do so. In this case, its an easy way to cover without impacting the SP and the difference between $1.48 (which btw was the bid) and the option price of $1.50 wouldn't discourage the holder of the call not to exercise the calls if he was desirous of closing out a large short position quickly and with certainty. I agree, except assuming isn't necessary. |
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Post by cretin11 on Dec 20, 2015 16:02:50 GMT -5
Thanks for explaining that, trend. I see what you mean now. Interesting theory. Is there any way to verify how much of that may have occurred?
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