Doc, you are making the right moves. Edamo's getting assigned early on his Jan02/200 short puts is another sign of QCOM has hit bottom.
Let us recap:
Open Interest on Jan02/200 puts: a week ago around 200, and now 70. There were a lot of positions closed or assignments took place. Last week Ed and I sold Jan02/200 puts around 121 through 130. I doubt that the buyers of our shorts exercised the option. It is more profitable for them to sell back the options. Afterall it is short term gain anyway.
Since options is done through clearing, more likely who exercised the options are smart people who already own qcom and about 5 months ago when qcom was around 180+, they hedged and bought jan02/puts at a fraction of what it is today. well, these people has own qcom for more than one year, hence they would exercise the option since they think qcom is close at the bottom. they will get long term capital gains, and can use the proceed to buy qcom at a much cheaper price (which was sold at 200 minus cost of option). if they wait next week, they have to pay more for qcom.
Therefore, if one gets early assignment on a short put, it is not all that bad.
Paul
BTW could you share what happens to your early assignment last month. Did the stock go up after that? |
