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Strategies & Market Trends : Option Spreads, Credit my Debit
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To: dealmakr who wrote (524)2/14/1999 1:19:00 PM
From: NateC  Read Replies (2) of 2317
 
David while you're going "back to the books", if you could explain something sometime...or anyone else....it would help my understanding.

If I wanted to construct a true "covered put"....and Shorted a stock at 100, (let's say 1000 shares) thinking I'd cover the short at 95....THEN.......Sold 10 contracts of a 90 Put 2 months out......I've had trouble constructing in my mind what happens with the shares I'm short, if the Put should be ITM at expiry.

Say, that my short position has done well, and now the stock is at 89 the morning of Expiry.
If I let the Put be exercised, I'm obligated to buy the stock at 90, right...let it be "put to me".

How do the shares I'm short affect this.......could I just close both positions simultaneously?

I know that this is rarely done, at least as far as I know, and I'm aware of the hazards of being short, in fact have never done it...just would like to learn more
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