When I shorted 2 Put options a couple months ago, on Friday nothing happened the market closed and I didn't get assigned. I thought I would be keeping the entire premium, the option was ITM still by 3.00
Monday morning came, and I see I have been assigned the 2 contracts, and I see $13,000 missing in the account. I started to panic and quickly deposited $2,000, and found I didn't have enough for the next 100 shares.
After I deposited the money, the assignment started and I had 200 shares of the company. Without me realizing, on the last trading day I lost -$2,000 from my final trade while holding these options short, I shorted the options before I lost -$2,000.
What would happen if I didn't quickly deposit the $2,000 on Monday morning? I am using webull, and I don't think they let you short options on margin with money you don't have. In my case I had the money, then lost the money on Friday before the assignment occurred. I was reading some sources and it sounds like I'd be out the entire $13,000 because I can't fulfill the other $2,000. I wouldn't receive any shares at all? What exactly happens?
Do brokers do options assignments differently?
byu/Snoo_60933 inoptions
Posted by Snoo_60933
3 Comments
Good News… You are a typical Reddit User and you are Clueless about Assignment. Assignment does not change your position. Assignment CLOSES THE TRADE, it does not bankrupt you. If you were losing money , you will be losing money after assignment, but not much more, your broker held all the money you need to close the stock position. If you were Put shares, Sell them, If short Shares , buy them. Try these Tasty vids to see if they help.
https://ontt.tv/2QCXvDU 5/30/19: Portfolio Analysis – Assigned on BIDU!
https://ontt.tv/3SOcA Unwinding an Assignment May 20, 2021
https://ontt.tv/43flu What Happens When an ITM Vertical Spread is Assigned? Jan 25,2022
https://ontt.tv/lRGPu Finding Your PL After Assignment Aug 17, 2023
There are two topics here.
The first is how assignment works. In a nutshell, brokers report exercises of long options to the OCC and then the OCC randomly assigns them to brokers who have short options. It’s up to each broker how they assign those across their client accounts, but I believe it’s random everywhere. However, the timing of your account being updated will vary by broker, so you might not see updated positions until the morning of the next market day.
The second is around your specific scenario. It sounds like you had almost enough cash to cover the 200 shares you were assigned. Your brokerage then loaned you the remainder on margin against those shares. That would leave you with a negative cash balance, although that’s not a problem if you’re okay with the margin loan. If you didn’t deposit the additional funds you’d just be accruing interest and the cash balance would get a little more negative every day until you either sold the shares or reached your margin limit and started having them slowly liquidated.
If you didn’t have enough cash + margin to cover the shares, your broker would have directly closed your positions at market pricing before the market closed on expiration day. Depending on broker they might have given you a heads up earlier so you could manage yourself out of the position before they were forced to.
You sold PUTs? What do you mean by shorting PUTs?