Scott:
Not exactly. My understanding of how options work is that a general reconciliation is done by the Chicago Board of Options each day on what has been exercised. The Board then randomly allocates the exercised options to brokers who have reported sold options. The brokers then choose someone on their list who has sold the option and assign it to that person. Brokers can do this randomly or they can choose who to assign the sale to. I imagine they tend not to assign sales to frequent traders as a favor to them. I don't think it has anything to do with whether you sold the option at $1, $2, or $5 since it fluctuates every day.
What this means for you is that if you sell the $20 option, each day between now and March 22, it is possible that someone may exercise their option to buy at $20. It could be assigned to your broker (randomly) by CBOE or to some other broker. If it is your broker, then whether you get it or not depends on how many sold options your broker happens to have in that stock at that price. If you are the only one, yours gets exercised.
You may have sold the option for $2, but it may be exercised by someone who only paid $0.50 for it. Still, your shares could be called to fill that exercising of the option. It's all a crap shoot, of course. The conventional wisdom is that 80% of options do not get exercised and I read one posting about this where a guy said he did not get exerised even though the call was $7 in the money!! He was a heavy trader, so his broker probably gave him a break if all the options were not exercised.
Hope this helps. It's taking a chance, of course, but it is a way to make a sure profit if you only paid $17 for your shares.
Walter High |
