How To Manage Assigned Autotrading Positions.
Like it or not, assignment is part of options trading.
An option buyer has the right to exercise an options contract. Option sellers may be assigned exercised options contracts. Exercise and assignment are the two sides of the same transaction.
Sometimes positions go against you, and you are assigned shares of stock. Assignment is even a core part of some strategies (think: put selling or option wheel strategies).
Autotrading is not exempt from assignment. Remember, bots simply automate manual trading decisions and processes. There’s no way automation can eliminate potential assignment (the OCC’s process is random).
So, how do you handle assignment of a position in the autotrading platform? Here’s a step-by-step guide if you do not want to keep the stock.
1. You are notified of assignment by your broker.
If you sell options, you can be assigned stock at any time, and you are obligated to accept the assignment. You have multiple options once assigned. You can keep the shares (if your account has the necessary funds to hold 100 shares per contract), or you can exit the stock position.
When you are assigned shares of stock, you typically receive an email or platform notification from your broker. The notification identifies the assigned position and account.
2. Select the position in your bot.
Now that you know the assigned position’s details, select the position in your bot to manage the position.
3. Manually override the position.
Select “Manual Override” to transfer management from automated to manual.
Overriding a position does not close it; the position remains open in your account, and you are responsible for its management.
4. Close the position in your brokerage account.
This may look different depending on your broker and the position type.
For example, this was a put credit spread with an $87 short strike and an $82 long strike. The short put was exercised, and I was assigned 100 shares of XLE at $87.
I did not want to hold the shares of XLE stock, so I sold the 100 shares of stock and closed the $82 long put option.
The long put was also ITM, so I closed that contract in my brokerage platform, offsetting the assigned $87 short put.
5. Edit the overridden bot position with the closing details.
Finally, you can enter the closing details into the overridden position in the bot to update record-keeping and document the position’s details.
I closed the position for a $5.00 debit, which was the difference between the two put option strike prices.
This resulted in a $385 loss on the position after adding the original $1.15 credit.
That’s it! The bot dashboard now accurately reflects the overridden position’s results and capital availability.
How you handle assignments is a matter of preference and investment goals. This example shows one way to handle the assignment process and keep the bot performance and capital usage accurate by editing the position to reflect the assignment outcome.