I’m now selling at-the-money call options against my remaining SPAC shares, instead of liquidating them, in part to capture more upside and in part to avoid realizing more capital gains this year.
Once the merger happens (or rather 2 days before the meeting to approve the merger, because that’s the redemption deadline), there is no longer a $10 floor.
Writing naked call options on SPACs is dangerous because too many people do that when they try to arbitrage between SPAC options and warrants, causing the call options to have negative extrinsic value, which causes people to exercise them to get the common shares, which causes your call options to be assigned, which causes you to end up with a short position in the SPAC which you’ll be forced to cover because your broker won’t have shares available to borrow. (Speaking from personal experience. :)
causing the call options to have negative extrinsic value, which causes people to exercise them
Duly noted. That seems like a good time to buy back the calls. And then buy some more to exercise yourself. Not sure how long this lasts. Maybe it’s enough to watch it twice a day, or maybe you have to program an order in advance.
Once the merger happens [...], there is no longer a $10 floor.
How much warning do we get to redeem the shares? Maybe that’s when you buy back the put. Although, if everybody thinks that at once and drives up the IV even more, maybe that’s time to sell another one instead.
I’m now selling at-the-money call options against my remaining SPAC shares, instead of liquidating them, in part to capture more upside and in part to avoid realizing more capital gains this year.
Once the merger happens (or rather 2 days before the meeting to approve the merger, because that’s the redemption deadline), there is no longer a $10 floor.
Writing naked call options on SPACs is dangerous because too many people do that when they try to arbitrage between SPAC options and warrants, causing the call options to have negative extrinsic value, which causes people to exercise them to get the common shares, which causes your call options to be assigned, which causes you to end up with a short position in the SPAC which you’ll be forced to cover because your broker won’t have shares available to borrow. (Speaking from personal experience. :)
I closed my HCAC put at a small profit today.
Looks like HCAC wants to acquire Canoo. Roth Capital analysts are targeting $30.
Looks like TRNE became Desktop Metal Inc. (DM). I had sold a 12.5 May put on TRNE and closed it today by buying back the DM put at a profit.
Duly noted. That seems like a good time to buy back the calls. And then buy some more to exercise yourself. Not sure how long this lasts. Maybe it’s enough to watch it twice a day, or maybe you have to program an order in advance.
How much warning do we get to redeem the shares? Maybe that’s when you buy back the put. Although, if everybody thinks that at once and drives up the IV even more, maybe that’s time to sell another one instead.