Mistake Made

SPY Dividend Assignment

16-Dec-2016

There is a dividend distributed out for SPY which is at the expiration date of every quarter. (Mar, Jun, Sep, Dec).

Be sure to get out of any SPY options that is ITM on Thursday, because Friday (expiration day) will be the dividend date.

ThinkOrSwim platform will not be showing this dividend date on their chart. Only stock’s dividend date can be shown on their chart but not the ETF.

Trader who has a ITM long call position will exercise their rights before the market close for the day.

After the market close, the broker will scan through those short ITM position and assign them the short stock.

Before the market opens on Friday, I got a big negative position, short SPY position.

To close my position I have to select my short stock and long options, and create a closing position to close them together as a pair.

The dividend loss will be charged at a later date. There are also charges for buying back the stocks.

AAPL Dividend Assignment

09-Feb-2017

I forgot about the dividend risk on AAPL. My trading plan was to hold AAPL till dividend date thinking that the price will fall down after this date.

I was doing a long call vertical spread (iron condor) because the volatility during this period is very low, and naturally my spread options are both ITM. The more ITM they are, the better is my position.

I have totally forgotten about holding my ITM position over the earning day.

On this day, I notice that my opened P/L brew very large. This is due to my short stock position.

If I exercise my long options call, I will still be making positive on this spread since they are ITM (selling $120, buying $115, making $5 for each share).

By doing this, I am throwing away the options premium that I spent on this spread.

So ultimately, on this vertical spread I made $500 – the option premium I had paid for this spread – $57 (the AAPL dividend of $0.57)

Not very very bad. The other leg is making more loss.

Have to calculate here…

Avoid Day

  • Expiration
  • Dividend
  • Earnings (Gap Up/Down)
  • FOMC
  • NFP