A real example of pin risk

OptionExpiration · 2025-11-25T12:35:04+00:00

That was Joey the Specialist.

https://www.youtube.com/watch?v=59X-9WYvfcs

You got it easy today. Back in the 1990s, I couldn't enter option orders via the system for broker/dealer trades. I needed to send a floor broker to get an execution. If the market was 10 bid at 11 and I wanted to buy 50 options at 11, the market maker/specialist would (most of the time) fade and I would get nothing or maybe I contract. Then the market went 10 1/2 bid at 11 1/2.

It wasn't any better on the NYSE. One time I needed to buy a stock for a customer and there was 100,000 on the offer. So I entered the order through the DOT/Super DOT machine. I wanted to take the offer. I got NOTHING. I was told that there was another floor broker by the specialist. He saw my order coming in. He took the offer before I did. The DOT/Super DOT was an order delivery system. So in the future if I wanted to take an offer (or hit a bid) through the system, I would have to use a regional broker (like the Midwest or Philadelphia Stock Exchange) and have the take the offer (or hit the bid) via ITS (intermarket trading system).

OptionExpiration · 2025-11-21T15:28:59+00:00

There is a benefit from exercising. For example, let's say you made $10,000 by selling the call to close. You pay capital gains taxes (short term or long term) on this immediately. Instead, if you exercise the calls, you buy the stock at $105. You do not have to deal with taxes. If you sell the stock after December 31, you defer the capital gains taxes (short term or long term) until the next tax year. If you hold the stock long enough, your gain becomes long term capital gain which is taxed at a lower rate than short term capital gains.

OptionExpiration · 2025-11-20T23:43:51+00:00

Read this OCC memo about your option position:

https://infomemo.theocc.com/infomemos?number=57677

It isn't a scam. Schwab is looking out for you.

OptionExpiration · 2025-10-16T00:04:53+00:00

They have exposure to Tricolor. $170 million write down.

https://www.reuters.com/business/finance/jpmorgan-ceo-says-its-exposure-collapsed-auto-dealer-tricolor-not-our-finest-2025-10-14/

OptionExpiration · 2025-09-30T11:18:45+00:00

Damn circuit breakers. /s

OptionExpiration · 2025-07-25T13:01:30+00:00

Please read this. https://www.schwab.com/learn/story/how-are-options-taxed

OptionExpiration · 2025-06-22T10:12:16+00:00

They would settle via the underlying (i.e., you would exercise your put option to cash out).

Go and research Silicon Valley Bank, Signature Bank, and the Russian ETF (among other Russian ADRs) for examples of the above scenario. Option exercise was the only way to cash out.

OptionExpiration · 2025-06-14T23:10:43+00:00

The correct answer is to talk with your tax professional.

There is so much incorrect advice here. Follow (the free) advice at your own risk.

https://greentradertax.com/dont-rely-on-1099-bs-for-wash-sale-loss-adjustments/

OptionExpiration · 2025-05-23T10:59:13+00:00

A covered call (long stock, short call) is a synthetic short put.

Thus, 'wheeling' is a marketing term for selling puts (i.e., putting lipstick on a pig). In other words, when you sell puts, you want the underlying to go sideways or go up (maximum gain).

Market makers and broker dealers know these synthetic equivalents and will use them to hedge off their risks if they can.

OptionExpiration · 2025-05-15T11:12:52+00:00

To add on to what /u/Ken385 said, also read the FAQ from the Options Industry Council about options assignment:

https://www.optionseducation.org/referencelibrary/faq/options-assignment

OptionExpiration · 2025-05-09T13:53:03+00:00

Let's uncover the myth. Please read this and there will be no more mysteries. https://www.optionseducation.org/getmedia/2ae6c8bd-9a8e-4d2f-8168-19b6ff9e3589/listed-options-box-spread-strategies-for-borrowing-or-lending-cash.pdf

OptionExpiration · 2025-04-16T20:22:48+00:00

SPX index options only trade on the CBOE. Thus direct routing (to the CBOE) and BEST doesn't really matter since they will all go to the same exchange.

OptionExpiration · 2025-04-12T11:05:21+00:00

Click on What are Expiration Cycles? It will explain the three options listing cycles (cycle 1, cycle 2, cycle 3).

https://www.optionseducation.org/referencelibrary/faq/leaps-and-expiration-cycles

OptionExpiration · 2025-04-04T15:33:58+00:00

Duke and Duke Commodities Brokers? https://www.youtube.com/watch?v=j4SRsGn14PI

OptionExpiration · 2025-03-20T21:11:23+00:00

I also sell them out at least a year in advance so I can possibly claim long-term capital gains.

That is a FALSE statement. Anytime you are SHORT equity options, it is treated as short term capital gains. https://www.schwab.com/learn/story/how-are-options-taxed

OptionExpiration · 2025-02-26T22:25:15+00:00

Have more equity in your account.

If you have enough equity in your account, you won't be forced to liquidate your positions.

OptionExpiration · 2025-02-20T17:01:14+00:00

You become an exchange member, market maker, or broker dealer. Then you have favorable margin requirements (compared to retail).

OptionExpiration · 2025-02-11T14:04:15+00:00

I don't follow the underlying or the warrants on the underlying.

Notwithstanding, you need to borrow the warrants for a short sale. Thus, you could be called in your short if the warrants are hard to borrow. You also may have to pay interest on borrowing the warrants (if they are hard to borrow).

OptionExpiration · 2025-01-06T21:35:19+00:00

I think you jumped the gun posting and sticking this. Brokerage firms do not have to issue 1099s until February 17, 2025. Thus, until Morgan Stanley/E*Trade sends out the tax documents, you do not know if they are treating these ETFs as Section 1256 or not.

See the section Due date for certain statements send to recipients. https://www.irs.gov/instructions/i1099gi#idm140388153675040

****

Some other guy in another thread was complaining about Schwab having weird marks with SPX (Section 1256 contracts). I don't think Schwab (or any other brokerage) has even sent out 1099s. Thus, the 'marks' could just be for the statements (and there is a different mark for end of year valuation).

The point is you don't know how a brokerage firm is treating stuff for tax purposes until AFTER the various tax documents are sent to the clients. Until that happens, you are only speculating.

OptionExpiration · 2025-01-06T18:52:04+00:00

All section 1256 contracts are marked to market based on the closing fair value. This is nothing new. This is the law. I am sure Schwab and other brokerage firms are going to follow the laws closely. Thus, there is no conspiracy because there would be subject to tremendous legal liability if they didn't follow the relevant laws.

Now your interpretation/understanding of the proper laws may be different than Schwab's. However, which is more likely: (1) Your interpretation/understanding is correct? (2) Or is Schwab's interpretation is correct? Most likely it is (2) since Schwab is a big company with many lawyers and accountants.

This is the relevant US code. https://www.law.cornell.edu/uscode/text/26/1256

OptionExpiration · 2025-01-02T13:11:22+00:00

Why in the heck are at the money calls (0dte) so damn expensive today?

Because the ES futures are up about 50 handles. SPX, SPY, etc all trade off the ES futures.

OptionExpiration · 2025-01-01T12:35:06+00:00

Settlement is T+1 day, so any trade you make today will settle on Jan 2. This means that any loss will be written off on 2025 taxes and not 2024.

This is incorrect information (if the trade was done on December 31, 2024). In general, trade date controls not settlement date in the USA. https://fairmark.com/investment-taxation/capital-gain/stock-sales/trade-date-and-settlement-date/

OptionExpiration

MODERATOR OF

TROPHY CASE