AlanInFinchley
Newbie
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Hi,
I just wanted to share my experience of this past weekend.
I had bought 3,000 contracts for Oct 15th $4 puts on Citigroup. I picked them up for a cent each, and with commissions they cost 1.3 cents each.
Anyway, on Friday they peaked around 8 cents, but I hung on too long and the price was dropping. Towards close, the stock price was about $3.95 but people were only buying them for 3 cents. By trying to get a better price I hung on just a bit too long and the market closed.
A little later is when the problems began. In after hours trading I started exercising some of the options and buying the stock back (at $3.95). I reckoned that I had a couple more hours of after hours trading in which to cash in as much as I could and then lapse the rest of them.
This is where a gap in my knowledge cost me a sleepless weekend. I hadn't realised that my brokerage had a cut off of 4:30pm (EST) to exercise or lapse options. I have some margin in the account, so I had managed to exercise 300 contracts and buy the 30,000 shares back, but I was left with 2,700 contracts, which were then (being in the money) automatically exercised.
Of course, that left me with a short position of 270,000 Citigroup shares, worth $1.08 million (in after hours the price had creeped up from $3.95 to $3.99).
Worse was to come when, hoping that there would be no news to cause a big shift in the price, I read that Citigroup would release their Q3 earnings this morning.
Anyway, I had little sleep on Friday and Saturday night, although I think that I slept better last night when I figured that there wasn't much I could do.
Luckily, my account lets me trade pre-market I managed to buy the stock back for $3.97 just after 8 am (EST) - leaving me with a tiny profit after taking into account the other costs.
As I write the offer price is $4.03, and I can only guess which way it will go when the regular hours trading starts. Recent history suggests a drop at the start of regular hours (the brokerage liquidates at around 9:40 am EST) but I am more than happy with my tiny profit and the promise of a good night's sleep tonight.
Anyway, I have learnt a big lesson, and just wanted to share it with you guys, partly as a way to wind down from this.
Take care.
I just wanted to share my experience of this past weekend.
I had bought 3,000 contracts for Oct 15th $4 puts on Citigroup. I picked them up for a cent each, and with commissions they cost 1.3 cents each.
Anyway, on Friday they peaked around 8 cents, but I hung on too long and the price was dropping. Towards close, the stock price was about $3.95 but people were only buying them for 3 cents. By trying to get a better price I hung on just a bit too long and the market closed.
A little later is when the problems began. In after hours trading I started exercising some of the options and buying the stock back (at $3.95). I reckoned that I had a couple more hours of after hours trading in which to cash in as much as I could and then lapse the rest of them.
This is where a gap in my knowledge cost me a sleepless weekend. I hadn't realised that my brokerage had a cut off of 4:30pm (EST) to exercise or lapse options. I have some margin in the account, so I had managed to exercise 300 contracts and buy the 30,000 shares back, but I was left with 2,700 contracts, which were then (being in the money) automatically exercised.
Of course, that left me with a short position of 270,000 Citigroup shares, worth $1.08 million (in after hours the price had creeped up from $3.95 to $3.99).
Worse was to come when, hoping that there would be no news to cause a big shift in the price, I read that Citigroup would release their Q3 earnings this morning.
Anyway, I had little sleep on Friday and Saturday night, although I think that I slept better last night when I figured that there wasn't much I could do.
Luckily, my account lets me trade pre-market I managed to buy the stock back for $3.97 just after 8 am (EST) - leaving me with a tiny profit after taking into account the other costs.
As I write the offer price is $4.03, and I can only guess which way it will go when the regular hours trading starts. Recent history suggests a drop at the start of regular hours (the brokerage liquidates at around 9:40 am EST) but I am more than happy with my tiny profit and the promise of a good night's sleep tonight.
Anyway, I have learnt a big lesson, and just wanted to share it with you guys, partly as a way to wind down from this.
Take care.
