Hi all,
I sold some spy 1/17/2025 calls @575 a month ago in part of a collar strategy. I want to avoid early assignment as much as possible if goes itm before the expiry date. I know I need to pay attention to the extrinsic value when near the quarter exdiv date. For an option like mine, how likely am I going to get assigned early, and at what price should I buy back the call if it indeed go above 575?
Sorry for the noob question I’m mainly trying to use this to hedge my long positions
Likelihood of getting assigned early for short spy calls
byu/Sad-Elderberry6897 inoptions
Posted by Sad-Elderberry6897
2 Comments
I asked a friend, who is way more experienced in options trading than I am, pretty much the same question because I was also nervous about one of my sold calls being assigned. He asked me if I did it naked, and I wondered why the conversation took such a turn lol
I’m sure I’m not explaining it completely right but he told me that since I’m on Fidelity I’m able to sell calls and not have to own the 100 shares before. Also that I was lucky that I asked before I blew up my account. To sum up his advice he said the safest bet is covered calls, which seems like a lot of brokers only allow that. Since I will already own the shares I don’t risk having to buy them at a higher price. Crisis averted.
Oh yeah he added that to really maximize the potential return, I should sell calls with a share price as close to in the money as possible without going in the money. So I’m looking into selling covered SPY calls at open probably a buck or 2 above the price it is at open since I don’t see it going up that much more that quickly.
Hope this helps but probably doesn’t since I don’t have much experience. Good luck all
You have a lot of time left on that call, and a non-trivial rise in SPY before early assignment would happen. So good to be thinking about it and have a trading plan ahead of time but at present you don’t have any decisions to make and likely will not for some time.
You likelihood of early assignment is dependent on how SPY trades, and right now you have a delta (rough probability) of approximately 26% of SPY being at 575 on your expiration date.
As to what you should be doing as far as price to buy back, as little as possible and ideally when it is profitable to do so. A bit impossible to answer since it depends on how badly you want to hold on to the underlying position and what premium you received when you wrote the call.