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Would my shares be sold if the price expired at above my call spread?

Personal Finance & Money Asked on February 10, 2021

  1. I own 100 shares of XYZ.

  2. I sold a call option on XYZ at a strike of $100.

  3. I bought a call option on XYZ at a strike of $110.

  4. The price of XYZ expired at $120.

Will my 100 XYZ shares be sold and a another set of 100 XYZ shares be assign to me?

This matters for tax purpose I believe.

3 Answers

Yes your shares will almost certainly be sold because you are short the call @100. You have the option, but not the obligation, to execute your call @110.

Answered by Matthew on February 10, 2021

When you are assigned on the short $100 call, your 100 shares of XYZ will be sold shares at $100.

If you do not sell your $110 call to close, it too will be assigned and you will buy 100 shares of XYZ at $110. You can designate to the OCC via your broker that you not be auto exercised at expiration on your long call but that would be foolish since it is worth $10.

Answered by Bob Baerker on February 10, 2021

One of the two sets of shares will be sold, obviously - either the one you had before, or the one you get from exercising your call. And yes, this can have impact on your taxes, potentially triggering a capital gains tax.

However, most brokers allow you to specify which 'bundle' of shares you'd like to have sold - typically for one or two days afterwards (but it must happen before settlement). So simply log on to your account after the trading and exercising happened, find the respective transactions in the log, and edit the affected share block to your liking.
If your broker doesn't have this option on the website, call them (but again, before settlement!), and ask them to adjust it - and maybe change brokers.

Answered by Aganju on February 10, 2021

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