Is there any pin risk on index options for ah moves or is the cash settlement at close?
Let’s say you have a Poor man’s covered call and your short call is in the money on a Wednesday at close can it get assigned after close and then the stock price changes greatly before Thursdays open. Can this happen losing you a lot of money in a similar way to what can happen on Friday if you don’t by back your short due to pin risk or is this only a risk at expiration?
Ok, I know the #1 pin risk mitigation strategy is to close your positions prior to expiry.
But let's say for one reason or another that doesn't happen, and now it's 4:01 pm on Friday.
What would your options be? Long or short the underlying in the extended market? Or is it not reasonable in case there aren't shares available to short?
Hello Everyone!
I have been selling credit spreads for a year now so I still consider my self an amateur trader. I understand what Pin Risk is. My question is specifically around when can one lose due to Pin Risk.
Scenario : If the stock price is way above (let's say +20% away) the short leg of a put spread and on expiry day including after market hours the Stock Price does not fall enough to breach your short put strike price.
Q: Is it ok to let the spread expire worthless? Or could I still get assigned on the short leg, just incase a counterparty exercises the out of money put option? I am wondering why would anyone exercise an out of money option? Can it happen at all? because that will lead to a margin call on my account.
Example: I have a credit put spread on TSLA, 770/820 strikes, expiring 19th Nov. If on the day of expiry TSLA closes at 1000+ price, is it ok to let it expire?
PS: I never get to a situation where the short leg is breached because I either roll or close the spread. Even when the Stock Price is above the short put strike price but within 10% I close the spread on the day of the expiry.
Thanks in advance for your comments!
On Friday, I forgot to close my NEGG 30-35 call credit spread. I collected $1000 credit for it, NEGG closed at 30.50, so I could have closed it for net $500 profit, but I simply forgot to do it.
Needless to say, for several days now I've been having anxiety cranked to the max, unable to think about anything other than how ruined I will be if I get assigned and NEGG opens significantly higher on Monday.
Over the weekend, I found out I had indeed been assigned a thousand shares short, which could easily wipe me out if there were any significant gains over the weekend.
I placed a premarket order to buy back 1000 shares at 31 and it has now filled at 30.97, so I'm now clear.
I cannot begin to describe how relieved I am. This could very easily have ruined my life. I never ever want to ever go through this ever again.
Buy to close your spreads, no matter how far out of the money they are the day before expiry. Pin risk can and will get you eventually if you get complacent or just plain forgetful.
I'm a student of the game, and need some help understanding Pin Risk.
Upon viewing my TDA statement, I saw something I didn't understand:
For a credit spread I let expire OTM this past Fri 9/17, the short leg was shown on my statement as having been bought to close.
I called in to TDA helpdesk to ask about this.
The gent explained that their risk assessors automatically executed the buy order 9 minutes after market close to help avoid any potential risk of assignment.
I said, "My strike was OTM at 4PM market close. How could I be assigned?"
He replied, "It's something called Pin Risk. The strike doesn't matter when you're short. If, in after hours trading, the market moves your short in the money, you could be assigned."
"But the option is worth nothing after 4PM", I said.
"If you're long, yes. Not if you're short.", he said. "That's why we closed the short leg, and let the long leg expire. The guy on the other end who's long can exercise, and you could get chosen at random."
"So should I always close my short legs rather than let them expire?", I asked.
"Yes."
End of conversation with TDA rep.
WTF kind of madness is this? Does it expire at 4PM or not?
Edit: This conversation was for ticker $SPY. But I understand it is different for $SPX, which expires 4:15. Thanks in advance for any help understanding this devilry.
Yes, I have made sure the option is ticked in game settings.
Yes, I have re-logged and made sure that I have not entered my bank pin yet this session.
It will not allow me to jump over the Wilderness wall without entering my bank pin, but the Edgeville lever and lodestone works.
EDIT: The clan wars red portal also allows entry without entering your bank pin.
EDIT 2: Climbing down the cliff from Trollheim also allows entry into the Wilderness without entering your bank pin.
EDIT 3: It appears that the lack of a bank pin prompt is due to the warnings given when entering the red clan portal. If your warnings are all toggled off, you should get a prompt for a bank pin. This does not apply to the Wilderness lodestone, Trollheim cliff, or Edgeville lever - I am still able to teleport to the Wilderness via the levers without any warning, and climb down the Trollheim cliff without any prompt.
Please fix this, ninja team.
First, I know I'm turbo-stupid for getting into positions when I apparently didn't foresee all possible outcomes. But the risk of getting pinned is not at all obvious in a credit spread -- one assumes the long leg is insurance, no matter what happens. I mean, that's its entire point. But I know better now. It still seems so weird though. Anyway...
So I wanted to spitball with this community about the best ways for avoiding this risk entirely.
1a. Don't enter spreads. This is easy.
1b. Close spreads before expiration, no matter what (and take X% profit programmatically). This is almost as easy.
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Now, I had the idea to put the long leg expiration one week further out. But then I realized this is probably the definition of a diagonal spread. By my reckoning, you'd be getting less premium for zero pin risk (it would be zero, right?). I don't know if that's a reasonable trade-off. Or if there are securities where that makes more/less sense. Or just the overall pros/cons of diagonals vs horizontals. Thoughts?
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Buy a new longer leg near or at expiration in anticipation of opening a newer spread soon and to cover in case of pinning. (Question: do you have to open spreads within the same transaction? I don't see why not. Especially since they're seemingly not treated as a tethered product at expiration anyway.)
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That's all I can think of.
I've read about the undefined risk pinning can create for a call seller. It is my understanding holding an ITM call option you sold at expiration opens you up to pinning where the buyer can assign you potentially during aftermarket hours. Then if the stock gaps in the wrong direction at open your collateral call option may not cover the difference.
The several scenarios that occur can be a bit convoluted when reading up on this. What I want to know is how to avoid this. Is closing your spread prior to expiration and holding less volatile underlyings sufficient?
Additionally it seems this could also occur with early assignment if the buyer executes after hours and there is a big move in the underlying. This may be less likely to happen with plenty of time left on the contract as the buyer would lose their time premium they paid for.
I have a lot of pins, some of them maxed out, some still new, but very weak. Shops just opened up and with food and everything, I just never have enough yen. So is it safe to just sell all pins you don’t need? And is the trophy ‘Made of Money - Possessed ¥999,999’ for having so much money at one point or collectively over time?
Sold 35 MSFT 207.5/215 strangle this week, closing out the 207.5p today for 98% max profit when we hit $216 or so, but left the 215c open to expire.
My cheap ass (who lives in an igloo where trades cost money) wanted to save the $0.01/share plus commission when I’m working with a $400k+ account.
Fkn Scrooge McDuck over here.
Anyway fellow degenerates, pin risk is real. Close your trades.
And a big fuck your to whoever made massive bank off my AAPL $465c covered calls I sold. Enjoy it.
https://imgur.com/a/v2ThM8l/
Edit: https://en.wikipedia.org/wiki/Pin_risk_(options) since some of you mopes can’t be bothered to learn things on your own.
"...we come away w/a more cautious stance on: 1) the transition to Idea Pins, 2) MAU trajectory following pandemic-driven pull-forward, & 3) impact on both user experience & monetization following platform shift."
https://preview.redd.it/fju2szuuuce71.png?width=1651&format=png&auto=webp&s=8d8c67dfa421f402da74ef53b9ddecdd1a1628ef
How many posts do we need to see of people losing all their items, accolades, progress, etc, before people realize that taking part in any multiplayer, in the games current state, puts them at risk of these issues?
0. Preface
Hello apes. I am not a financial advisor and I do not provide financial advice.
A few things need to be cleared up, since there's some, uhh, chaos.
Options are extremely risky but it is not a demon-spawn that should be avoided like the plague. It is another tool at retail's fingertips just like DRS / direct registration. If you don't understand them, ignore the posts and do not participate in options.
But, the discussion should not be muted entirely just because a few people YOLO'd into deep OTM CALLs with 0 delta and lost their life savings. That is not the fault of options. That is the fault of their misunderstanding or greed of the play.
If anything, this can hopefully at least draw eyes back on the Variance Swaps DD which has oddly disappeared from discussion lately.
1. Clearing Some Stuff Up
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No, you should NOT sell shares to play with options. I was hoping that was implied. I don't know how that idea spread around, but it is absolutely not something that should be done. It was a lack of foresight on my end to not state that immediately.
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DRS is the way and in my opinion should be the #1 priority because it locks the float. Apes should keep on direct registering their shares as this puts pressure on the SHFs and MMs by reducing the amount of shares in their pool to borrow.
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The reason that options are being floated around is because it can be used as additional pressure on the SHFs and MMs - especially for their Variance Swap hedge. I tried to touch on Variance Swaps in the previous post but I think it got overlooked heavily. I'll go into this for the next section.
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I did not imply to bet on weeklies or short-term option plays. The strikes that I posted were simply a reference to show how options effect hedging versus buying shares outright. In fact, I personally would NOT do short-term plays (expiring within the next few 8 weeks). If you're trying to do short-term option plays, there's a good chance you will get burned. Pickleman ( /u/gherkinit ) and others are thinking that the best strategy for the proposed upcoming futures cycle are ITM / ATM CALLs for February 2022.
- Does that mean to follow suit? No. Does that gua
Let's say I want to trade credit spreads on SPY, how do I handle "pin risk"? Is there a way in thinkorswim to auto exercise my option if I get assigned? I have a hard time understanding how credit spreads are "defined risk" when thinkorswim won't let me enter these setups because I don't have enough buying power (It seems to think I'm taking a naked position). My biggest fear is mismanagement of this strategy and owing a lot more than the max loss. Thanks for any advice!
###TLDR; Mods - Allow Options Positions/Gains/Loss Posts. It will instantly remove 90% of the FUD around Options.
One of the major topics of the past few weeks has been Options FUD. FUD on both sides - for and against options. There has been claims of brigading, bad actors, grifting, streamers being charlatans, and so on. This very sub had one of it’s mods accused of improper conduct just for trying to moderate some of the discussion. The mod of the jungle sub claimed that “there have been bots actively dispatched in this community today to spam pro-options sentiment. The forum-sliding patterns are plain as day when you're modding." On top of all this, there are apes who don’t care about options, don’t know enough about options, or honestly, are sick of all the arguments and the attempts at division.
####Well, good news. I found a solution to this problem. The amount of FUD and arguments around options will persist as long as the debate is hypothetical. I propose to the mods that they can fix this by allowing people to post their options positions (including gains and losses, and only on $GME). That will quickly turn the conversation from hypothetical to practical.
It will also be conducive to:
##Transparency
##Education
##Accountability
Transparency - This is the biggest part of the DFV story that people tend to leave out. He was incredibly transparent with his positions. He posted nearly daily in the old sub. I believe sunlight is the best disinfectant and will cut down on a majority of the recent claims of Options FUD and shills and bad actors and grifters. Worried that an account is a bot spreading pro-options FUD? Well, let’s see if they have posted their options positions. Worried that someone is anti-options because they don’t understand options or got burned by weeklies? Let’s check their positions.
Education - Discussing options in the hypothetical is difficult for many. Seeing it play out in realtime is easier and more educational. Just think of all the questions you’ve had on buying calls, exercising them, etc. If someone made a post walking through an actual purchase or an actual exercise, we could pin that post and people could learn from it. I knew nothing about options until I saw enough posts on the old subreddit. Seeing them allowed me to realize gains bigger than I ever thought possible in a much shorter time than it took me to get my MBA.
Accountability - This relates to Transparency, but is different enough tha
... keep reading on reddit ➡
Just opened an ameritrade account, not certain about how they manage spreads. Does anyone know what policy they use when it comes to early assignment? I’ve read that robinhood closes out options one hour prior to market close to avoid this if i’m not mistaken. Also if there is something else worth mentioning about Ameritrade i’d be happy to know.
There was a successful post today trying to teach options but there's small details in the post that are wrong, but it's absolutely necessary to know when trading options.
(This post, I'll break it down)
https://www.reddit.com/r/Superstonk/comments/s29jhd/option_basics_what_are_options_vol_1/
I'm just going to talk about this portion.
>Oversimplification - BUYING OPTIONS
>You can BUY the following option types
> • Calls
> • BUY A CALL
> • If the stock price goes UP, the value of your CALL Option Contract goes UP
>• If the stock price goes DOWN, the value of your CALL Option Contract goes DOWN
> • Puts
> • BUY A PUT
> • If the stock price goes UP, the value of your PUT Option Contract goes DOWN
> • If the stock price goes DOWN, the value of your PUT Option Contract goes UP
>Conclusion
>The basic trading strategies for BUYING options
> • Buy puts if you think the price of the stock is gonna go DOWN.
>• Buy calls if you think the price is gonna go UP.
>You risk losing only what money you’ve used to buy the options.
>Oversimplification - SELLING OPTIONS
>You can SELL the following option types
>• Calls
> • SELL A CALL
>• If the stock price goes UP, the value of your CALL Option Contract goes DOWN
> • If the stock price goes DOWN, the value of your CALL Option Contract goes UP
>• Puts
> • SELL A PUT
> • If the stock price goes UP, the value of your PUT Option Contract goes UP
> • If the stock price goes DOWN, the value of your PUT Option Contract goes DOWN
>Conclusion
>The basic trading strategies for SELLING options
> • Sell puts if you think the price is going to go UP.
> • Sell calls if you think the price is gonna go DOWN.
Did you catch it? There's a few mistakes here but I'll pin point just one.
> • If the stock price goes UP, the value of your CALL Option Contract goes UP
This is correct. But a couple lines down and...
>• If the stock price goes UP, the value of your CALL Option Contract goes DOWN
Just these two line OP said if the stock goes up then the contract goes up AND down?? What!? No. He said these are based off if you sold or bought, but it does not matter if a call was sold or bought. If the stock goes up then the call contract value goes up regardless if you bought or sold.
This is what I think he meant to say...
Objective of buying a call: stock goes up
Objective of
... keep reading on reddit ➡)
