Short XON 7/22 expiration, $25.50 strike calls expired worthlessly

action

My short position of 1 contract of XON 7/22 expiration $25.50 strike calls expired worthlessly. This closes the position originally entered on 7/18 at 75¢. Total return after commission was $71.25. Return per share after commission was 71¢.

parting thoughts

This trade was executed as entered, but not as intended. I wanted to cover my entire position of 500 shares of Intrexon, but wound up getting a partial fill. I have mentioned in the post about the entry the positive aspect of Fidelity’s pricing in this case. Now I must mention the negative aspect:

Fidelity does not allow penny increments on low priced option contracts. If I am not mistaken, the minimum increment is for options priced under $3, and 10¢ for options priced above $3. In this specific case, let’s say the contract is bid at 20¢ with the ask at 30¢. As a seller, I can do one of three things:

The irritating issue here is that with the limit order options, one might find oneself without the yield enhancement/risk protection of a short option in a covered call/covered put scenario. Alternatively, if accepting the 20¢ bid, one gives up the that would otherwise usually be achievable: If I were to enter a trade like this at TD Ameritrade, I would enter it with a limit of 23¢ and I would be quite confident in receiving a fill. 23¢ vs. 20¢ is a very meaningful 15% difference!

July 25, 2016 at 11:01pm · XON · options · expiration


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