Pin Risk Explained - Always Close When Trading Options!!

[@JakeBroe]

Give this video a LIKE to support my channel! Also check out my entire playlist on Trading Options here! kzbin.info/aero/PLscTZuOqKWIxSZzy4ObKWDznEsCot_1HU

[@thomasd5488]

Last year I sold a call credit spread on SPY and didn't close it on expiration day because SPY was a few dollars below the short call at the closing bell. After hours SPY went up just enough for the short call to be in the money and I had a short 100 share position on Monday morning, and a margin call. The long call expired worthless. I had to buy 100 shares on Monday, at the current market price, to cover the 100 share short position. I was lucky, SPY was up only $1.50 so it only cost me $150 extra to buy the shares needed to cover the short position. A small price to pay for a lesson well learned.

[@JakeBroe]

Thanks for sharing your experience Thomas! SPY usually isn't too volatile, but if you had 10x the contracts, then that loss would have been $1,500. It adds up when people get crazy with spreads.

[@SamPhappalapa]

This was extremely helpful, should be a mandatory part of getting approval to trade options. At 5:24 shouldn't it be "sell call, buy call at higher strike"?

[@television1088]

Another reason, I once held a biotech put spread for 3 months, and made $10k in that time. The profit was maxxed out, but I decided to avoid the few dollars commission and just let it expire instead of closing it. In the last few days before expiration, they announced a breakthrough and my $10k profit dropped to $0.

[@redpilldude8688]

Dang…thanks for sharing tho. Solid lesson / advice

[@eyobhagos4899]

thank you for the explanation Jake!

[@JakeBroe]

You are very welcome Eyob! Cheers!

[@Digitalgems9000]

so this is why robinhood has the auto sellout feature on credit spreads and options. happens around 30 mins before lol

[@olenaromanchuk2021]

Makes sense! Always close the trade unless it is so obvious that both legs will be OTM by expiration, by that time, you spread will be worth less than $0.05!

[@television1088]

Right, except for everything after "unless"

[@Digitalgems9000]

@@television1088 LOL

[@karazya]

Hi Jake, thanks for the info here. Couple clarifying questions about some of the important times you mention. Let’s take $SPY for example: Is the window for options expiring between the strikes an hour and half after close (5:30 PM ET) or 4:15 PM ET? I’m trying to understand if the hour and half time means that your short option can be assigned an hour and half after market close, or if the other party simply has an hour and half to decide whether to exercise or not if the short option is ITM between 4:00 PM and 4:15 PM ET. Hope that makes sense. Thanks for the help.

[@eternalvinepress]

Thank you. I am new to Options Trading and this is great information and advice.

[@moxiangmingxin]

Very important info in the video, thanks Jake!

[@JakeBroe]

You are very welcome BN! Cheers!

[@yogeshlinganna521]

Thanks for the info, Jake. Very useful.

[@JakeBroe]

You are very welcome Yogesh! Cheers!

[@PRHBxEaSyKill]

Yes 🙌🏽 excellent video, thanks for the info!!

[@JakeBroe]

Thanks JCee! Cheers!

[@Jade-pf8dw]

This was really helpful - thank you

[@JakeBroe]

Cheers Bec!

[@dukeyin1111]

lol I heard all this wonderful things about butterfly and condors...where I have bounded loss. man this is extremely risky.

[@JacksonWelch]

Wow this was an awesome video Jake

[@JakeBroe]

Thanks Jackson! I hope people find and watch it.

[@jasonpermanna308]

So that includes everything like ur investment and buying power liquidate to 0??

[@jasonpermanna308]

let say 17 put credit spread, can I just buy 17 regular put option in the money next week and exercise it?when pin risk happened.

[@metamoonnn]

another exception would be to let expire only if OTM for credit spreads (both legs), right?

[@rickliconjr]

Jake can you demonstrate how to close the one you exercised with Schwab?? Thanks!

[@JakeBroe]

Yep! I will make a video about closing those positions once I close them all!

[@agimelman]

for example you are trading vertical call spread - short leg in the money long is out of the money and you think it will expire worthless - an hour before market close I close a short leg but at the last second long leg goes into the money - what then?

[@JakeBroe]

If your short leg was closed... you are not liable to buy or sell anything to anyone. If your long leg then goes in the money, then you are the one who has to notify your broker that you want to exercise. Ideally you make money in that scenario.

[@heesookim9578]

Thank you^^

[@JakeBroe]

Thanks heesoo! Cheers!

[@matthew7910]

So if I buy a call or out by itself, why don’t I have the risk of getting assigned with that?

[@redpilldude8688]

Correct. Buying means you have the right but not the obligation. You can only be assigned if you sold.

[@PeterJames143]

Thank you.

[@muffemod]

I was here yo!

[@JakeBroe]

That you were! Cheers muffemod!

[@ConanNYC]

The video scared the hell out of me. Should be required watching for new bies

[@JakeBroe]

I agree Conan! Hopefully the algorithm will help people find it!

[@television1088]

Stuff like this is the reason people consider option trading to be risky. It's only risky if you don't know the caveats.

[@eduardazayev4230]

Spy does not look like it's going to fall, crazy.

[@JakeBroe]

Yeah... the more it goes up, the less likely my trade will succeed even if there is a pullback on the 3rd Friday of the month. I can't believe the Fed announcing they will end tapering isn't getting more of a reaction.

[@dwalker6868]

Yay it was a Green Day for you/ us all

[@JakeBroe]

SPY keeps going up D! Make it stop, haha.

[@ghost9pm407]

The subtitles on this video make no sense. It's hilarious.

[@headlibrarian1996]

One of the reasons I trade cash-settled options like SPX and RUT.

[@JakeBroe]

Solid plan HL! Cheers!

[@wingzero8986]

heh, "whatever crazy stock you are trading" because only we are the crazy ones, not jake. never jake.

[@JakeBroe]

I get the crazies comments from people telling me that are trading spreads on GME, AMC, TSLA, and all these weird penny stocks. Those stocks give me heart burn.