I have been having a really bad month financially. I had sold a lot of SMCI options (yes I know how bad this sounds now) that got assigned this week. My account went into margin. So, to help pay for the margin interest I sold covered call options for 442.5 that expired 8/30. The options expired out of the money so I thought I was safe from my stock getting called away. I even spoke to Charles Schwab representative and he confirmed that the stock would not get auto sold told me that if they don’t get exercised by 5.30 pm Eastern, then I’m safe.
However, I woke up this morning to see that all my SMCI shares had been sold. I called them to check and they said they got randomly assigned and exercised and there’s nothing they can do about it.
Here’s what’s fishy: every time an exercise happens, Schwab sends a notification on the app, and also an email saying options have been exercised. However, I received no such notification or email- only thing I got was an auto email saying my shares were sold.
So this seems like the notification I would have gotten if my shares were auto-sold by the exchange, which should not have happened as my options expired out of the money.
Am I being crazy or is Schwab doing something fishy? Can any of you expert options traders help me out with this? I have lost a LOT of money (pretty much it has wiped out all my savings) due to this so any advise or thoughts would be helpful. Thank you!
Wheel strategy options assignment – need help please!!!
byu/fruitsandveggies05 inoptions
Posted by fruitsandveggies05
8 Comments
After hour price was 451 at 17:30. Option holder can exercise after hours.
Your cc was ITM.
No, Schwab is not doing anything fishy, sorry . . .
Since the move to Schwab assignment emails have been coming on Mondays instead of Saturdays TDA used to send them.
If the shares are not in the anccount and the rep said they were assigned, then they are gone.
Options can be exercised and assigned up until 5:30pm ET and based on after market price moves. A quick look at the chart shows the stock rose to around $450 before 5:30p so it is logical the shares were assigned. The only way to avoid this is to close and not let them expire.
You would not have known this at, before or even after 5:30p as the exercise and assignment process works behind the scenes and overnight.
Sorry this happened, and I’ll spare you a long lecture, but you did take too much concentrated risk on one stock instead of diversifying across multiple stocks in various market sectors.
I hope you will not do this if you trade again in the future, and please share your experience with others as this is a common problem for newer traders . . .
Sorry to ask a stupid question, but what is the wheel strategy?
Options get exercised after hours all the time
Sorry OP, as others have pointed out they were ITM so this is business as usual, nothing shady. Going forward cash-settled index options like SPX might save you some wear and tear, they provide leverage but avoid assignment risk altogether, require no margin, have high liquidity, do not have a mysterious after-hours settlement price formula, and have Section 1256 tax treatment to boot.
I would guess phone calls at Charles Schwab are recorded. If you have an issue what you believe, the man or the representative told you then call Charles Schwab and tell them. They might be able to pull the call out of their system and review exactly what the words were.
Did you sell CC at a strike lower than your purchase price? If you did this, then you applied the wheel strategy wrongly. The strategy must be applied to stocks that you would happily hold for a long period, selling at a discount feels like you were not so happy about them
Well the good thing is you paid off a big chunk of not all your margin.
Lol