cheynew, You have those APR 1.50 you said, well there is still a chance that they will be in the money.
If they would come at a pps where the premium is equal or less then the strike upmark (say Bid premium is 0.05 and pps is 1.55$) then you could be better of by exercising them, and selling an equivalent number of shares to pay for it if you don't have the cash available or don't want to increase your shelf.
This is for the following reasons:
- the Bid volume on those call options will be kept low (a few hundred contracts), MM will not want people to back out massively if the pss would make a peek before the close on Friday.
- the MM will set a long stretch before increasing the premium to 0.10$ and he will not fill you at that price but average you between 0.05 and 0.10$ for the SAME reason.
- In L3 the contracts are fragmented. Yesterday at close only 132 contracts:
NASDQ 26
NASXO 14
MIAX 21
CBOE 71
You will have a hard time to fill more then 60 unless the pps makes a jump and in both cases there are about 3500 contracts with owners that may think the same thing (because we are so close to Friday).
- The main MM is behind CBOE and he'll retract most of the 71 contracts if NASDQ gets hit, unless your software allow you to hit him first (I don't know if Ameritrade has that feature) in which case he MUST fill AT LEAST the complete outstanding size at that level (71). You can then try filling from the others and hope they don't retract. So avoiding to Sell to Close and instead exercising may be the way to go.
- you'll save the commission on the options if you exercise (depending on your plan that's 0.005 to 0.02 cent per share more in your pocket) and your Broker does all the work anyway. You'll only have a small commission if you also sell PPHM shares to pay for the exercise (which above 10 contracts is in general lower then then the option commission).
- If you are dealing with a MM (vs a covered seller) you'll force him to buy if he isn't covered (which in the current state is possible, add the premium you paid to your strike and you'll see the MM has way to go before he makes a loss). The MM buying to deliver your PPHMs will also support the pps which is good for your other shares.
- Finally you get more control because you can pick a momentum where the pps is at one 1.53$ and above and sell PPHMs. In that case if at close you call your Broker and exercise you have no more stress. Your profit on this transaction (which will still be a, diminished, loss in total given the higher premium you paid) will be locked in by the pps at which you sell. The strike is 1.50$ no matter what. So even if PPHM would go back to 1.45$ you will still have the difference between 1.50$ and the price you sold your PPHM's and have the cash and an equal amount of PPHM on your shelf at the end. If you go for the premium you'll have to struggle all the way to Friday and if PPHM would , say, touch 1.57$ the premium will only be changed if with a delay during which the pps could go back to 1.50$.
Just some idea's, not telling you what you must do!
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