I'm trying to asses the probability of an early assignment for MSTR (which gives no dividend) options position called ZEBRA I intend to open and hold regularly:
- Short ATM call near expiration (0-7 DTE, -50 deltas)
- Long 2x ITM call further from expiration (30-90 DTE, 75 deltas each)
This way I replicate holding the stock (keep approx. 100 deltas) but benefit from theta decay (short call has higher theta than total theta of long calls). The problem is I intend to do this with leverage, meaning if theoretically everything is assigned, my cash+margin is not enough to hold the resulting stocks.
Will this sooner or later destroy my account somehow? What if I hold the short call 0DTE until late Friday afternoon, it has almost no extrinsic value left, the stock moves up and I'm suddenly deep ITM with this short call? Can I get early assignment without the possibility to sell the long calls? Or will the broker just liquidate the whole position? Or is the early assignment risk non-existent as the stock gives no dividends? Appreciate any feedback from the experienced options traders!
Posted by HomoInvestus