<p>I have no idea what you are doing. </p>
<p>27.7-23.35= 4.35.</p>
<p>You have the spread valued at 4.85.</p>
<p>I would mortgage my house if I could buy the spread anywhere near 4.35.</p>
<p>You’re right, it’s 4.35 not 3.35! Well I bought it at 2.73. I’m having some difficulty figuring out the stuff associated with the 100 168 -173 and the 10 143 - 200 spy call spreads with the way that fidelity reports it. Apparently 85 168 calls were sold, 9500 spy shares were sold at 173, 1000 spy at 143 were bought, 8500 spy were bought for 200.87. I haven’t really had a chance to think about this but the way that Schwann and Estrada report it makes a lot more sense to me.</p>
<p>Ok. I want to talk about boxes. Options have a relationship with each other. Theoretical values are our friends .
Boxes are our friends.</p>
<p>Assuming no dividends. The price of Buying or selling the fb 50-55 call spead and the 50-55 put spread is the difference between the strike prices, in this case $5… Minus the interest costs of carrying the position.</p>
<p>This works for every vertical spread with a stock with no dividends.</p>
<p>Let’s just say interest is zero.</p>
<p>The fb 50-55 call spread and the 50-55 put spread is worth $5. </p>
<p>When we have wide markets in the call spread, we can look at the put spread. </p>
<p>The fb 55-50 put spread is .15. </p>
<p>Therefore $5-.15= 4.85. </p>
<p>$4.85 is the value of the call spread</p>
<p>Now… You have to give the traders a few cents to take you out many times. People arent trading for free. </p>
<p>You might have to sell the spread for 4.80 or so. </p>
<p>Or you can buy the put spread.
Buying the put spread locks you in. A perfect hedge unless interest rates rise or ore side of the spread closes at a strike. </p>
<p>You dont get to pull your money and reinvest it though. Downside of a box compared to selling out the call spread. </p>
<p>If it looks like fb is going to close at a strike, extremely doubtful in this case, you should close out the box.</p>
<p>Now the call spread is around 4.85 and not 4.98, so yeah… You might want to keep the spread.</p>
<p>But there will be other trades where the above may be useful. You can just use theoreticals if both the call spreads and put soreads sre trading at theoretical values.</p>
<p>We dont have to trade in between markets. </p>
<p>I calculate 4.85 do you have any idea about those spy trades?</p>
<p>I dont think fidelity sold any options.</p>
<p>This is not what happened?</p>
<p>When you were assugned on the 173 calls, you ended up short 9500 shares.</p>
<p>Fidelity exercised 85 plus 10 calls for a total of 9500 shares. The calls no longer exist. You are long 9500 shares and short 9500 shares. The shares will net out to zero. If not yet , Monday.</p>
<p>Tomorrow you should be long 15 168 calls and short 5 173 calls and short 10 200 calls.</p>
<p>Unless …fidelity actually sold the calls and bought. 9500 shares. They may have done this for margin purposes. </p>
<p>They actually sold 85 168 and 9500 spy at 173 at least according to the transaction confirmation statements that I printed out.</p>
<p>Then fidelity had to buy the stock.</p>
<p>Do you see that anywhere?</p>
<p>My current positions are exactly what you wrote. I’m still a bit shell shocked with this as I expected to be relatively safe through the end of the year.</p>
<p>Jury duty cost you… </p>
<p>Next time you wont get caught.</p>
<p>Yes, they paid 1,707,470 for it at 200.87 a share. </p>
<p>I called fidelity yesterday and they were a bit confused. The guy who did the transactions is going to call me tomorrow.</p>
<p>The spy trades? </p>
<p>The 168-173 call spread was worth $5. </p>
<p>The trader who exercised the 173 calls, because of the dividends , could make more money long stock and long puts than long calls which is the equivalent position …which is why he exercised. </p>
<p>Ok… I think you had a reg t problem. You didn’t have the funds in the account to handle the margin of the short sale that occured with the assignment of the 173 calls. </p>
<p>So… Fidelity probably bought the stock with a cash settlement. This enabled the short stock and the purchase of the shares to settle the same day so you would not be in violation of any margin rules.</p>
<p>My guess…</p>
<p>What price did you get for the 168 calls?</p>
<p>33.5</p>
<p>Once Fidelity decided to buy the stock, fidelity had to sell the calls. </p>
<p>Otherwise fidelity would have increased your long position dramatically amd given you a different trade. Would have changed your risk.</p>
<p>That makes some sense to me from the viewpoint of holder of the calls. There are 3 ways that SPY can go for the remainder of the year – up, down, or staying about the same. I think there are plenty of good reasons to believe that the odds are greater that it stays the same or goes down then that it continues to go up. So for the holder of the DITM long call, exercising their option and collecting the Sept. dividend makes a lot of sense. </p>
<p>I think that’s the problem with DITM short calls. They tend to have a lot of intrinsic value but not a lot of time value, so no strong incentive for the holder of the long call to keep them open. At some point the risk that the market will fall outweighs the potential reward of the possibility of increased value. </p>
<p>I’m no expert but I wouldn’t be willing to bet on SPY going to 210 by year end. </p>
<p>I take what happened to DocT & dstark as a negative sign. I think that means that there some high end, institutional traders who believe that the SP’s bull run is coming to a close, and they are expecting either market consolidation or a downturn over the next several months.Hence they are taking their money off the table now, rather than hang onto options if a downtrend is likely. I could be totally off base in my interpretation… but that’s my guess. </p>
<p>Doct…you made a lot of your money back.</p>
<p>168 + 33.5 = 201.55</p>
<p>You sold spy for the equivalent of 201.55. </p>
<p>Fidelity bought the stock for 200.87. </p>
<p>201.55-200.87= . 68</p>
<p>Dividend was .93…which you have to pay.</p>
<p>Your loss is only .93-.68=.25. </p>
<p>8500 shares x .25= 2125 loss on the 168 calls.</p>
<p>That is awesome…</p>
<p>What about the other calls…where did you sell those? 143 calls?</p>
<p>I’m going to ask a seemingly stupid question: is my net gain what I sold - what I bought on this transaction - my initial cost - 9500 x .939?</p>
<p>Are you asking for tax purposes?</p>
<p>Calmom, what happened to me or doct has nothing to do with the future stock price.</p>
<p>Doct, your net gains from selling the options at a premium reduce your losses because you have to pay the dividend.</p>
<p>Your loss is $2125 minus the premium you made from selling the 143 calls plus whatever commissions you have to pay.</p>
<p>The loss from the dividend isn’t that bad.</p>