<p>I’m trying to see how badly I screwed up. Looking at my account and subtracting the dividend, it appears I made a significant amount of cash.</p>
<p>Yes…you did…big win…big win…</p>
<p>Doct, take $5-(dividend loss+premium from fidelity sells)-cost of spread. Muliply by 8500. </p>
<p>$5-(.25)-cost of spread. Multiply by 8500.</p>
<p>You have to subtract commissions which aren’t huge.</p>
<p>You also made money on the 143-173 spread. (I know that is not what you started out as doing).</p>
<p>Getting that .68 of premium from the 168 calls was fantastic. Cut the dividend loss dramatically. The loss was only .25.</p>
<p>You sold the spread for 4.75 because of the dividend loss.</p>
<p>So… For example, if you bought the 168-173 call spread for 3.75, you made $8,500 minus commissions. </p>
<p>Plus you made on the 143-173 call spread. </p>
<p>On the downside, the dividend cost doesn’t hit until Oct 31. That is when you are going to pay the dividend on 9500 shares.</p>
<p>I think there is some confusion between birds in hand and in the bush to view the dividend as as “loss”. DocT is not going to “pay the dividend” to anyone on 9500 shares of SPY. Whoever acquired shares of SPY from him is going to get a dividend, but that is not money being taken out of DocT’s account. If he was long some shares that were called away, that is what we lawyers call a future “expectancy” but that is not cash in hand. </p>
<p>In my mind, the problem with looking at a dividend as part of the gain or loss is simply that the dividend is paid on an an investment where the underlying holding is subject to significant fluctuation. If SPY drops 2 points in a quarter, that’s >2x the value of the dividend, and it wipes out the “gain” (compensates for the “loss”). </p>
<p>I assume there are some traders who go long ahead of an ex-dividend day, with the intent to sell their long position at the first opportunity when they can sell at break-even or above. They are reaping those dividends - so that’s their strategy and if they have enough money to play around with, I suppose they can make good money that way. </p>
<p>But it’s still makes no sense to me to look at it as a loss. What is the difference between an investor who sold 8500 shares of SPY on Thursday, and the investor who never never owned any SPY at all (e.g., me) ? Neither will get paid the dividend … but again, it’s not a monetary loss. Maybe it’s an opportunity cost … but I don’ really see that it has a place anywhere on a spreadsheet. </p>
<p>Doct is going to pay the dividend. The money comes out of his account on Oct 31. If you are short stock, you are responsible for the dividends a company pays out.</p>
<p>I believe I owe the dividend. Rest assured, this will not happen again - famous last wods!</p>
<p>Lol!</p>
<p><a href=“Short Sales | Investor.gov”>http://www.sec.gov/answers/shortsale.htm</a></p>
<p>Doct, I was a little too negative when you first mentioned the dividend issue. Selling the 168 calls with a premium diminished the damage . </p>
<p>I dont know why I was fixated on fidelity exercising the calls when the calls could be sold with a premium. </p>
<p>I just felt bad for you. :)</p>
<p>I don’t know but I have a headache reading the last few posts. I need that option book in my garage. Argh!</p>
<p>Lol!!!</p>
<p>I have a couple of headaches right now. I dont think they are going to go away as fast as docts or cost as little. ;)</p>
<p>I have been assigned before on call spreads even with having to pay dividends. For example, I was assigned on some of my 1/17 qqq’s where I had a 74.63 - 79.63 call spread. However it was straight forward as the both legs were exercised. My confusion with the spy case is because there are combinations from legs from different call spreads, some things were exercised, some where the calls were sold etc. I think I’m still confused and hope that the guy who did this will explain it clearly to me tomorrow.</p>
<p>DrGoogle: It has given me a headache also.</p>
<p>I am going to write this and it will get easier as you read farther down…</p>
<p>Once you put on a spread… It can be changed. You can add a leg . Take off a side. Trade other options. Trade other spreads.</p>
<p>When a short call is exercised, it doesnt matter that the short call was part of a spread. </p>
<p>I know to figure out your pnl, it is easier to things out by thinking i paid x for this spread, I sold it for y…therefore, I made z. </p>
<p>The pnl I gave you is correct. Well, it is a penny off because the dividend is almost a penny higher. I am going to fix that. </p>
<p>Take $5, the difference in the strike prices…add .68 because you sold the 168 calls for a .68 premium and you did not pay a premium for the 173 calls. so that is $5.68-the dividend of .94… That is what you sold the 168-173 call spread for…or 4.74. </p>
<p>Now to make things simpler…</p>
<p>You sold the 168-173 call spread for 4.74.
You know what you paid for the spread.</p>
<p>Subtract your cost from 4.74.
That is your profit. </p>
<p>You closed the spread out 85 times.
Each option is 100 shares.</p>
<p>So simpler…</p>
<p>4.74-cost of spread times x (85x 100) is your profit not including commissions and fees. </p>
<p>Simpler…</p>
<p>4.74-cost of spread x 8500 is your profit not including commissions and fees.</p>
<p>So look up the cost of your spread and you will know what you made on 85 spreads.</p>
<p>The only variable missing is the cost of the spread.</p>
<p>So…simplest 4.74-cost of spread x 8500 = profit not including commissions and fees. </p>
<p>I’m going to have to think about this tomorrow.</p>
<p>Even easier…assuming you traded the 168, 173, and 143 calls once to get in and once to get out.</p>
<p>Look at your realized pnl section.</p>
<p>Take the realized gains and losses of the 168, 173 and 143 calls. Deduct the dividend of .939 x8500. </p>
<p>That is your pnl on realized gains.(the realized gains and losses may not have hit yet). </p>
<p>Edit:) Oops… You have to figure out the realized pnl on the 8500 shares. </p>
<p>Then This should be easy enough. :)</p>
<p>Once the realized gains hit correctly…</p>
<p>Then you can go to the unrealized gains.</p>
<p>The unrealized gains and losses will fluctuate since the position is not closed. </p>
<p>If the realized gains havent hit yet, all the info is in the unrealized section.</p>
<p>Ok…now you can see what fidelity says. :)</p>
<p>Why is the S&P down 10 in the past few hours? It usually does not move so much in after hours.</p>
<p>I’m just offering the tax accounting answer - I am not sure whether or no that’s the question DocT is asking. </p>
<p>You have to view each leg of a spread separately. Normally, when you open and close the entire spread, it doesn’t make a difference because the math all reconciles very easily. Both legs are opened and closed on the same date, so if you have it set out on a spreadsheet then it’s easy to see the gain or loss.</p>
<p>But when it’s broken up then that is more separate entries to reconcile, and may involve some some allocation of commissions.</p>
<p>That is, if a person is short 10 calls on XYZ at strike $50 - and gets assigned on 5 shares – and the other 5 calls expire worthless – then there will be a reported gain on the 5 contracts that expired worthless – which will be equal the total premium received on the 5 calls less commissions.</p>
<p>I generally only sell covered calls so that’s the only type of assignment I see, but I think it would work essentially the same way.</p>
<p>With a covered call, if in the above example, I have 500 shares of XYZ which are assigned – so my gain (or loss) is the difference between the what I paid to buy XYZ vs. what I get on sale, with the premium from the option added in as extra proceeds of sale. So if I paid $40 per share, took in $2 on the sold call, and the stock is assigned at $50, then I have a $12 per share gain. ($10 in increased share price + $2 option premium). </p>
<p>But in your case it’s a spread and I am thinking the confusion is because you there is a combination of different spread legs being exercised and assigned. But it is still the same underlying stock - so I think the math is simply this:</p>
<p>Cost basis: The total cost you pay for all shares bought to cover the short position, plus the amount of premiums paid for the specific options that were exercised, plus commissions.
Sale proceeds: The total amount received for all shares assigned, plus the amount of premiums received for the underlying specific options, less commissions. </p>
<p>As to the dividends – I’m sorry, I misunderstood what dstark had written before but I get it now - the amount of the dividend is added to your cost basis — see <a href=“Dividends Paid on Short Sales | The Motley Fool”>http://www.fool.com/personal-finance/taxes/2002/12/06/dividends-paid-on-short-sales.aspx</a></p>
<p>So gain (or loss) is still net proceeds less cost basis. It’s just that with multiple different strike prices involved, there’s more math required to get to the totals. </p>
<p>The trade was in an ira so I’m not concerned about the tax consequences</p>