How Likely is Assignment on Call Options?

[umfan92 10]

Suppose I sold a call option that was in the money by 9 cents.. Expiration is in 150 days. The price of the option is $0.59. I read somewhere that if an option is in the money by a few cents, it will most likely be assigned. Is this true? If it is likely, is it likely to happen soon after I sell the call? Since I have no experience in the stock market, I have no idea how it would work out. Thanks.

[Tams 20]

Suppose I sold a call option that was in the money by 9 cents.. Expiration is in 150 days. The price of the option is $0.59. I read somewhere that if an option is in the money by a few cents, it will most likely be assigned. Is this true? If it is likely, is it likely to happen soon after I sell the call? Since I have no experience in the stock market, I have no idea how it would work out. Thanks.

 

1. if there is money on the table, you can be sure someone will grab it.

 

2. if it costs more to grab the reward then the money on the table, people will ignore it.

Edited June 23, 2011 by Tams

[umfan92 10]

Sooooo, it's not likely at all? I didn't think so but I read otherwise.

[SIUYA 11]

Suppose I sold a call option that was in the money by 9 cents.. Expiration is in 150 days. The price of the option is $0.59. I read somewhere that if an option is in the money by a few cents, it will most likely be assigned. Is this true? If it is likely, is it likely to happen soon after I sell the call? Since I have no experience in the stock market, I have no idea how it would work out. Thanks.

 

you need to understand the difference between a European and an American option.

Then to see if the stock (assuming its a stock) has any dividends between now and the expiry date which may cause the option to be exercised early.

 

Otherwise YES - the option will likely be exercised on expiry day if it is in the money. Many exchanges and systems allow for automatic execution of options that are in the money, this is a result of making the systems easier to work, and also as it helps eliminate the ""öpps I forgot error""

It is only likely to occur on expiry day (or possibly on the day before ex dividend day ) if that is the case.....its highly unlikely before hand.

But if it does it will be a win in your favour as you will pick up the option premium straight away and can do it again.