BTW - Lost out on about $1K of profit because of moves I made to protect myself against fears of my broker's systems. I had several thousand of modestly in the money SEPR calls, against which the SEPR calls I discussed in the last post were sold as spreads. For the most part, I was expecting to go flat SEPR (in that account) for the first time in awhile. BUT I had NURO puts exercising on me in some size, MNTA puts perhaps executing on me in some size, and some ARNA stock likely to go away due to call exercise.
I was worried that if followed in the wrong order, the exercises could have thrown me into a call position despite my spreadsheets showing all scenarios would ultimately free up margin room. So I exercised the SEPR calls on Thursday but was told I did not have enough room to do so despite my spreadsheets showing $10-15K of raw headroom (~$50K of buying power for marginable stocks). I suspect their systems were looking only at the move associated with the exercise (i.e., money needed to exercise) and were missing the fact that funds were flowing into the system by converting the ITM portion of the calls (only value left) into marginable stock.
I ended up having to reduce IDIX somewhat (too bad not on Wednesday) and bought back the SEPR $57.50 puts (which were clearly worth $0) for $230 (including $30 of commissions and 0.10 cents due to just wanting to be done with it). Of course, I get done with this, exercised the calls and had $40K of pure margin ability left, so I compounded the errors and sold some $62.50 puts and lost another few hundred dollars.
All in all, out $230 on the $57.50 trade and $80 in margin interest due to having to tap actual loans for 2-3 days as well as the losses on the new puts sold offset by a few hundred dollars back on IDIX.
This is not a normal problem for me as I tack here and there each month, usually only getting close to margin line during the last week of exercise. I now have tons of headroom again, no margin debt, and some cash to earn interest. Anyone else ever worry about this? Was I too cautious - please note I had middle to high 5 figures of intrinsic value in those calls. BUT there was the obvious spread against them. . . .
I did find myself explaining the mechanics of what was going on with my margin and why to the options experts at this discount house. They were professional and helpful (and commented they wished other clients monitored things as tightly as I was), and I could probably have forced them to do it as I wanted but I wanted to not lock the account. Oh yeah, they over-exercised the calls by 1 contract and when they fixed it, they took the 100 SEPR, the -1 contract (from over-exercise) and forgot to give me the $5000 of exercise cost back. That took another day and several complaints (who knows if necessary but that is a lot of money to just give away) to get back.
Jon |
