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Tag Archives: Options Clearing Corporation (OCC)

Anatomy of a Reverse Stock Split

Option contracts can be standard or adjusted. Certain corporate events may change standard option contracts to adjusted contracts. These events include stock splits, mergers, acquisitions, special dividends, spin-offs and reverse splits. After these events, options are altered to reflect these changes and make buyers and sellers of options whole. This article will focus in on […]

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covered cal;l writing and dividends

Why Would a Call Buyer Exercise, Rather than Sell, an In-The-Money Call Option?

When we write a covered call, there is a trader or market-maker buying that call on the other side of the trade. We know that as expiration approaches, the time value of options tends to approach zero (Theta effect). With that in mind I received an email from Marcos in early May 2017 astutely asking […]

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In-the-money strikes and early exercise

When And Why Will My In-The-Money Strike Be Exercised?

Covered call writers receive option premiums for undertaking the obligation to sell our shares to the option holder if that holder decides to exercise that right. Understanding when and why exercise will take place is critical to the implementation of appropriate exit strategies and therefore maximizing our option and stock profits. Let’s first look at […]

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