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Early assignment is the #1 fear of beginner options traders. Many new traders think that as soon as the stock price moves through their short strike price, they’re going to get assigned and forced into a stock position.
They also think that this increases their risk instantly.
In this video, I walk through an exercise and assignment example where I lay out exactly what happens when I exercise an ITM call option, what happens to the counterparty, and the P/L result of exercising.
I also walk through an NVDA bear call spread example where the trader would end up with $346 in profits if assigned on their short ITM call, when it makes sense to exercise an option, and how to gauge early assignment risk.
==== Video Chapters ====
00:00 Exercise and assignment showdown
02:52 Understanding intrinsic and extrinsic value
04:15 NVDA bear call spread assignment resulting in +$346
07:05 Why would you ever exercise an option?
09:16 When early assignment risk increases
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Disclaimer: Nothing contained in our content constitutes a solicitation, recommendation, promotion, or endorsement of any particular security, other investment product, transaction, or investment. Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involve substantial risk of loss and are not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. Past performance is not necessarily indicative of future results. I am not a financial advisor. The ideas presented in this video are for entertainment purposes only. You (and only you) are responsible for the financial decisions that you make.
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