COH Put Assignment

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Put assignment: I just wanted to record this quick video for you because I did get a couple of emails and we did as well, although maybe not everybody did, but we did get assigned on our short 43 puts for Coach. You can see that we got the email this morning and right now, we’re long the stock at a trade price of 43 because that’s what our strike price was.

The stock is trading at about 35.87, or I guess that’s where it closed yesterday, so I just want to walk you through exactly what we’re going to do this morning to go ahead and get rid of the stock position and then potentially roll the contracts into July. It’s not going to be that cumbersome to do it, and I think maybe some people overestimate or freak out a little bit when this happens, but it’s not bad at all. You’ll have nearly a lower margin position because you’re carrying stock right now at 43, so that’s going to affect your margin, but we can get that back, and you can get that back in the first day.

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put assignment

The first thing that we want to do as soon as the market opens which is about two and a half hours, for now, is just go ahead and create a closing order to sell the actual shares. Now when you do this, it’s going to default to maybe at the 35 strike or something like this, but you want to make sure that obviously, you’re selling them for the market price. 

In our case, if we are going to sell these shares and if the market opens at 35.87, that’s exactly what we’re going to end up selling those shares for, and that’s going to reduce our position on the actual stock, so that will give us back a lot of margins. Now, we’re going to maintain this position in Coach because we ideally wanted to roll these contracts, we just didn’t want to move them as soon as we did out to July.

One of the things that we’re going to do after we get the stock position removed is going back out and sell the 43s again in July. You can see here that the 43s are trading at a mid price of about 7.15 or that’s what they were trading at the other day. That’s what we want to do, are we want to just now resell out those July 43 puts, and that’s going to get us back all the premium that we theoretically are going to lose today based on just the actual stock assignment.

This is just based on the stock assignment. It doesn’t factor in that we already had some potential profit on the day for the actual put itself and how they got assigned. The net effect is pretty small on the day even though it looks like it’s perfect for the real stock position. But this will neutralize everything that we have and get us all the way out to July for the position in Coach.

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And you can see if we do that in Coach, this is what our profit loss diagram is going to look like in July. It still has that same strangle type feature, and you can see that Coach is right now trading right here. We still want Coach to land anywhere between primarily 34 and 44. That’s ideally where we want the stock to land.

And right now, it’s trading in that range, so the best thing we can do is just roll these out to the 43 puts in July and then apparently maintain the position from there. Hopefully, this quick video in the morning helps out. And if you have any questions, as always, please give me a buzz. Thanks!

About The Author

Kirk Du Plessis

Kirk founded Option Alpha in early 2007 and currently serves as the Head Trader. In 2018, Option Alpha hit the Inc. 500 list at #215 as one of the fastest growing private companies in the US. Formerly an Investment Banker in the Mergers and Acquisitions Group for Deutsche Bank in New York and REIT Analyst for BB&T Capital Markets in Washington D.C., he's a Full-time Options Trader and Real Estate Investor. He's been interviewed on dozens of investing websites/podcasts and he's been seen in Barron’s Magazine, SmartMoney, and various other financial publications. Kirk currently lives in Pennsylvania (USA) with his beautiful wife and three children.