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Politics : Formerly About Advanced Micro Devices
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To: Petz who wrote (102684)4/9/2000 12:34:00 AM
From: Joe NYC   of 1577426
 
Petz,

I bought a 55/70 spread.

I was wondering about following situation:

Suppose you have 100 shares, and 1 contract of 55/70 spread (which I am assuming is long call at 55 and short call at 70). Now suppose this is in a cash account (retirement kind).

If the stock ends up above 70, the cheapest thing to do is to do nothing, that is to be assigned on your 70 short call, and exercise the 55 long call. This whole transaction at the expiration would generate a credit of full $15 (none of this dealing with the bid / ask spread of options).

Anyway, do you think the broker would freak out and tell you you can't exercise your call, because you don't have the cash in the account (even though the cash is coming on the same settlement date from the option assignment)?

Joe
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