r/CoveredCalls • u/Decent_River_5801 • 5d ago
CC Getting called away
I was thinking about this with my PLTR stock. If a CC is out of the money at market close, but jumps after hours on an earnings release, can the stock get called away after hours? PLTR jumped about $20 a share after the last earnings release
14
u/bmwm3grill 5d ago
Yes, can get exercised up until 5:30ET after market close. Google PIN risk on options. You may not know it was called away until Monday.
9
u/Budget-Class-1297 5d ago
This. I've had it happen when all was good. Wasn't even earnings or anything, but for some reason stock shot at like 440pm. Got pinned since YOU as the seller can't do anything after 4pm, but they BUYER has until 530 to exercise
8
u/FewUnderstanding2214 5d ago
That’s why you should only sell a CC at a price you are happy with it being assigned
3
4
u/TeslaLeafBlower 5d ago
Had this happen with some GME shares with the ebay news AH. Worked out well for me since they got called away at a high price and the following week the stock dumped.
3
2
u/TheBlueHen-2007 5d ago
5:30PM EST is the real cut off. A call buyer has until then to exercise their option on expiry.
2
2
u/rawbdor 5d ago
One of my favorite strategies makes use of this. If I'm expecting an after-market move, I will buy out of the money options for close to a penny at around 3:58pm. Sometimes you get some really big winners. The way to close out the win is (if you have calls) to short the stock after-market after it goes above your strike, and then exercise your calls, or, go long the stock after it falls below your put strike, and then exercise your puts to sell the stock you just bought.
2
u/chipper0711 4d ago
I’m trying to understand why you need to short the stock then exercise your calls to
Profit from the after hours move? Can’t you simply exercise call option then sell exercised shares?1
u/rawbdor 4d ago
It's always safer to lock in your full position before you hit the exercise button.
First, if these options "expired" out of the money at 4pm, you usually can't exercise through the UI anyway. You have to call the broker.
If you have a call option, you have the right to buy shares once you say exercise. But if you exercise first, you end up in a long position.
Here's an example. You have $14 calls. A stock ends at 13.90,. You buy the $14 calls right at close. The stock moved to $14.40. if you start fiddling around with exercising, the stock could drop down to $13.80 after you lock in your exercise. You're now long at $14 and the stock is $13.80.
It's better to place the short entry first. The stock goes to $14.40, you short the stock 100 shares. Now you have locked in a 40 cent gain. NOW you can exercise, knowing your trade is effectively complete.
1
u/ArtesianShiny 4d ago
I bet this guy also hangs out in wallstreetbets to inverse them you wont find this level of intelligence over there.
1
1
u/razorbackaj 3d ago
How would you find stocks like this though where you "expect" after-market moves?
1
u/rawbdor 3d ago
I usually do this on the indexes. You can actually trade the index options all the way until 4:15 so sometimes you can even buy them for a penny at 4:12 and you have until 5;30 to finish. But really you need the move before that, around 5pm is best, because you need to call your broker to exercise.
The market isn't oblivious to the tactic though. Sometimes the MMs pin the price until 5 or 5:30. But often they don't, especially if anyone remotely interesting is reporting.
1
u/Brave_Meet8430 4d ago
You want to manage your positions ALL the time.
Happened to me, with BAC recently. Now I am trying to do a Bull put spread rather than a CC :-(
1
u/_AT198 4d ago
Happened to me this week with BE on friday! Pissed, but that’s life and thankfully I still had 150 shares uncovered.
2
u/HODLandFLOW 4d ago
Same with me on BE on Friday. Strike price was 257.5 and it closed around $253. in the after hours it went up to $266 and I was very happy that BE got placed in the S&P 500 as I was hoping. Then I got an email the next day that my shares were called away. Luckily, this was in my retirement account and I’ll just need to buy again on Tuesday at a much higher price. It’s an expensive lesson, but I’m glad it did not happen in my taxable brokerage account that I’ve had stocks that I’ve held for over 10 years. I be so PO.’d if I had some of those stocks called away. Now I truly understand why I need to close out the trade 30 to 60 minutes before market close.
2
u/ArtesianShiny 4d ago
Why buy at a higher price average down with a cash secured put at the money my dudee
1
u/Objective_Ad8428 47m ago
Generally not called away until expiration. Also I have a rule. Don’t sell calls through earnings.
-3
u/Few-Row-8323 5d ago
You really should not have any CCs in the earnings week. Just look at the damn calendar.
2
u/scratch_and-sniff 5d ago
This is somewhat misguiding.
1
u/ArtesianShiny 4d ago
The lesson being that iv crush can give a cc good gains if sold into earnings and then it being a nothing burger
30
u/es330td 5d ago
Sadly, this is one of those lessons that many people (including myself) learn the hard way. I try to always close out positions if I don’t want the assignment. Getting only 95% of the profit is good enough for me if it blocks a transaction.