I’ve been trading options a few years so this was new to me, here’s the blow by blow:
Someone created a put option and sold it to me. This option says that the holder can force him to buy 100 shares at $220/share, no matter how low the share price goes.
I buy the put. I don’t have shares. If the price stays the same or goes up, the put simply dissolves. If, however, the price of the stock goes way down, say, to $210/share, I can, optionally, either buy shares of TSLA for $210 and force the put writer to buy the shares from me at $220, or I can sell the contract for about $1,000 to someone else who wants to do this.
However, the price did not drop. TSLA closed at $220, which is supposed to mean the contract expires worthless.
HOWEVER, because the put was 20 cents in the money ($219.80), the contract executes. As I do not have any shares of TSLA, I’m forced short, which puts -100 shares of TSLA in my account, which I have to buy to get back to zero.
Haunting_Ad_6021 on
Yeah, always sell them even for a penny. Set a stop limit order when you buy them
playa4thee on
I don’t blame you.. I blame Elon!
SensibleCreeper on
Wasnt who wrote it, it was your broker. All brokers exercise when in the money.
slamtt on
The writer had nothing to do with it.
TSLA was under the put price on expiry and etrade exercised the option for you.
The guy who wrote you that option probably got more fucked in the whole ordeal than you did.
culzsky on
wait so what exactly happened here? is this like getting assigned?
you buy the option to sell a stock at a set price, but doesn’t the stock have to get to that price before the option can be executed?
for example
i buy a put for tesla 200 expiring 08/01, the writter can just exercise it even if tesla is at 230 on 07/30?
am i getting this right?
Jeffinslaw on
Ouch  why didn’t your broker purchase the shares at market open?? They really waited for the rally to be well on track before buying.
kn_007 on
On Webull whenever I buy options I always click Do not exercise
Icy_Asparagus_575 on
bro be happy youre up 6% off that mistake
Ready2gambleboomer on
*If you don’t close it you can get exercised. Even if it doesn’t make any sense. l wrote some OTM CRWD calls which should have expired worthless. It didn’t make any sense at all. Ten minutes before the close and even INTO the close they were still out of the money on the day of expiration. I watched and KNEW something here is not right. I closed about half but couldn’t get the other half filled. After the close they announced CRWD was joining the SPY500 and somebody knew ahead of time. And of course I got fukt bigly in my anoos.*
*Why would they pay more than they could by just buying them in the open market? Leverage & they didn’t care* because after the announcement the stock moved up well past the strike.
Edit: In your case you were the buyer and the close was very close to the strike (happens all the time as bots pin them to different strikes). If there is any value at all the broker has the right to auto exercise if you don’t. They don’t have to tho and I’ve had them die when I thought the broker might auto exercise. The only way to know for sure is to close it. CBOE says only 10% actually get exercised. About 60% get closed and the other 30% expire worthless. It seems so much more here on WSB doesn’t it. 
14 Comments
I’ve been trading options a few years so this was new to me, here’s the blow by blow:
Someone created a put option and sold it to me. This option says that the holder can force him to buy 100 shares at $220/share, no matter how low the share price goes.
I buy the put. I don’t have shares. If the price stays the same or goes up, the put simply dissolves. If, however, the price of the stock goes way down, say, to $210/share, I can, optionally, either buy shares of TSLA for $210 and force the put writer to buy the shares from me at $220, or I can sell the contract for about $1,000 to someone else who wants to do this.
However, the price did not drop. TSLA closed at $220, which is supposed to mean the contract expires worthless.
HOWEVER, because the put was 20 cents in the money ($219.80), the contract executes. As I do not have any shares of TSLA, I’m forced short, which puts -100 shares of TSLA in my account, which I have to buy to get back to zero.
Yeah, always sell them even for a penny. Set a stop limit order when you buy them
I don’t blame you.. I blame Elon!
Wasnt who wrote it, it was your broker. All brokers exercise when in the money.
The writer had nothing to do with it.
TSLA was under the put price on expiry and etrade exercised the option for you.
The guy who wrote you that option probably got more fucked in the whole ordeal than you did.
wait so what exactly happened here? is this like getting assigned?
you buy the option to sell a stock at a set price, but doesn’t the stock have to get to that price before the option can be executed?
for example
i buy a put for tesla 200 expiring 08/01, the writter can just exercise it even if tesla is at 230 on 07/30?
am i getting this right?
Ouch  why didn’t your broker purchase the shares at market open?? They really waited for the rally to be well on track before buying.
On Webull whenever I buy options I always click Do not exercise
bro be happy youre up 6% off that mistake
*If you don’t close it you can get exercised. Even if it doesn’t make any sense. l wrote some OTM CRWD calls which should have expired worthless. It didn’t make any sense at all. Ten minutes before the close and even INTO the close they were still out of the money on the day of expiration. I watched and KNEW something here is not right. I closed about half but couldn’t get the other half filled. After the close they announced CRWD was joining the SPY500 and somebody knew ahead of time. And of course I got fukt bigly in my anoos.*
*Why would they pay more than they could by just buying them in the open market? Leverage & they didn’t care* because after the announcement the stock moved up well past the strike.
Edit: In your case you were the buyer and the close was very close to the strike (happens all the time as bots pin them to different strikes). If there is any value at all the broker has the right to auto exercise if you don’t. They don’t have to tho and I’ve had them die when I thought the broker might auto exercise. The only way to know for sure is to close it. CBOE says only 10% actually get exercised. About 60% get closed and the other 30% expire worthless. It seems so much more here on WSB doesn’t it. 
https://preview.redd.it/m0skfegjyhfd1.png?width=954&format=png&auto=webp&s=637007381501d5a8907638eaf4bc933aa2fb13fe
DOWN BIG! I will wait
Call them and tell them to fuck off bro this is a scam
Even if Tesla is a warm pice of crap. You just don’t short it
Even the comments indicate you still don’t quite understand how options work.