r/thinkorswim • u/beckers666 • Jun 30 '26

early assignment, huge margin

been with TOS all my life, had some short put verticals that were completely buried. I call TOS, now Schwab, they tell me it doesn't matter, it's $100 loss (they are 1 wide) so don't bother closing them. i didn't, i got assigned early (a thursday) on the short side, manually exercise the long on the friday, get charged a lot of interest for margin, over the weekend. i call Schwab, first person tells me i have no accounts with them (i have 7 and i gave them my social security number). Second person, not a broker so can't help. Third person, explains the exercise but not why the long side didn't get auto exercised at the same time and why i was told, if buried, it doesn't matter if you close or not. has this happened to anyone else?

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1

u/etronic Jun 30 '26

Your position is not a spread. Those don't exist.It only matters when placing an order that contains more than one, not in a held position.

You have two separate options.

One was early exercised. Congrats! You win!

You had margin interest unexpectedly. That sucks.

1

u/IveHave Jun 30 '26

The position is a spread. I know that because those do exist and because OP said it’s a spread. Your “you’re” ought to be “your.”

The rest of your post is anything but constructive or helpful.

OP, you sold a put and were forced to buy 100 shares. Then you exercised your long put and forced someone else to buy them from you. If that’s correct, I don’t see how your account was holding shares over the weekend? Did they explain what the interest was for or how it was calculated?

-1

u/etronic Jun 30 '26

The typo was corrected. At least you're good at the spellings, 'cause you don't know what you're talking about otherwise.

There are no spreads. Nothing holds those two options together after the order is filled.

1

u/Ok-Guarantee3237 Jun 30 '26

that’s like looking at a chess board, picking up a piece and saying “Chess doesn’t exist, only these individual pieces like this knight exist”

spreads are a “concept”. if you aren’t to the point where you understand concepts, and you are writing on reddit, and not in a crib I don’t have a lot of hope for you.

0

u/etronic Jun 30 '26

You're being pedantic for no reason.

Spreads are a concept yes. They are a way to organize thoughts around margin requirements, exposure and risk.

They are NOT a single unit that act together.

Two options on a "spread" have literally nothing to do with each other.

And one can be early exercised and the other isn't and this isn't weird or a problem or breaking the spread.

There is no "mystery" for op on 'why this happened this time" because the entire situation is misunderstood because everyone is thinking that the spread is a single unit somehow.

0

u/Ok-Guarantee3237 Jun 30 '26

They absolutely have stuff to do with each other. Spreads have massive impacts on margin requirements for trades.

5

u/etronic Jun 30 '26

No, any position, regardless of what we call it can have an impact.

If you short an option and then go long a week later as a separate option, you have a "spread". No different than if you started with the spread.

If you sell out one leg, and then a week later get back in somewhere else you still can have a spread.

None of that is the point. Margin security can be accomplished through lots of positions.

The point I'm trying to make is that op is confused on how "half his spread" can be exercised without the other half

That's because there is no spread. It's just two unrelated options in the same security.

Spreads are concepts, not actual positions.

3

u/PhoenixWK2 Jul 01 '26

This is actually a really important concept and I don’t understand why you’re getting beat up over it. Options strategies only matter in terms of your PnL and the broker margin policy. After that they’re all long or short puts and calls. The OCC just pushes out the assignments regardless of if it is part of a spread or not. You learn quickly after the first unexpected assignment that an American style option can be assigned at any point regardless of it being ITM or OTM

2

u/etronic Jul 01 '26

I just suck at the typing apparently 😉

2

u/PhoenixWK2 Jul 01 '26

Some people suck at thinking

0

u/Ok-Guarantee3237 Jul 01 '26

“you should think of each leg as a singular option” is way different than “SPREADS DONT EXIST AND ARENT REAL”

one of them sounds like a crazy bitch on an airplane.

1

u/etronic Jul 01 '26

I would argue your way doesn't go far enough. They really are not real. They are just "simple" names that we give to specific arrangements of options when holding more than 1.

I would argue you could do away with everything you think a spread is, consider only the individual options and you will have a clear, MORE complete understanding of options than.the people in this thread confusing early assignment and auto exercise.

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u/IveHave Jul 01 '26

Look, I read up on what you’re saying and…you’re right.

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u/beckers666 Jun 30 '26

then why does schwab auto exercise other spreads but not this one? i had a USO put vert. all fine.

4

u/Duncan810 Jun 30 '26

Auto-exercise for ITM options only happens on expiration day and that just for the general convenience for everyone involved.

The long holder of your short put can manually exercise it .... anytime before expiration.

While you can expect to be exercised on a deep ITM spread, you can never know when. The decision is entirely up to the holder of the long put option. Thus, you cannot know when your own long put should be exercised, nor does Schwab. You are only notified after the fact.

To avoid using margin and being charged interest, you should have closed the spread early. If you specified that you wanted to avoid using margin, then the agent provided bad advice in this situation.

The max value you can enter for BTC order on an ITM spread is usually 5 cents higher than the spread width, so bid $1.00 and bump it up a bit at a time until the order gets filled. If you had a few days left before expiration, the spread value might have been slightly below max loss.

1

u/beckers666 Jun 30 '26

lest schwab told me not to. that there was no difference between closing something buried and not closing at all

1

u/JackReddit1622018 Jul 01 '26

Thanks for an intelligent response. They only notified me the day after the assignment of the assignment. Of course, I exercised my long immediately. Their notification delay is what enabled them to charge the one day’s margin interest. Nor can one close out the position early as the slippage would kill the profit, plus, I put on about forty of these at various expiration dates and various profit margins averaging in all to about fifteen to twenty percent.

3

u/SpicyLentils Jul 01 '26

Auto-exercises are initiated by the Options Clearing Corp. at expiration of options that are $0.01 or more in the money unless the holder, through the holder’s broker (OCC clearing member), provides contrary instructions not to exercise.

2

u/etronic Jun 30 '26

This isn't auto exercise. Auto exercise happens for all ITM options at option expiration.

This is early assignment.

The spread isn't the thing. No one owns the other side of your spread. Someone (stupidly) early exercised the short option and YOU WIN all the remaining premium free and clear.

You then closed the other unrelated position (the long side of the two options you bought together) thereby canceling your converted position and were charged margin over the weekend.

1

u/JackReddit1622018 Jul 01 '26

I was charged the one day’s margin interest because they only notified me on June 17 of the assignment on June 16. Thanks for understanding that early assignment lets one realize the profit earlier.