Monday, June 22, 2015

Option Trade Update - Part #2

This post is a follow up to my post, Option Trades Update - Part #1 for Jun 21, 2015.

     My put option in Rogers Communications Class B stock was assigned. I checked my broker account last night the option was not assigned. I work up this morning and checked my brokerage account and the option was assigned.  I was expecting the assignment to show up this morning first thing as the last time an option was assigned to me, I found out Monday night.

     I owned 100 shares of Rogers Communications Class B stock since June 2014 when a put option was assigned with a $44.00 strike price, which you can read about here. My average cost base as a result of the first option assignment was $4366.90.

     This new option assignment had a $42.00 strike price.

Summary of Latest Trade

Investment : 100 shares * $42.00 = $4200
Option premium including commissions : $27-$10.95 = $16.05
Assignment fee : $24.95
Current annual dividend : $1.92 / share

Total Cost = $4200- $16.05- $24.95
                  = $4208.90

Yield = 1.92 /(4208.90/100)
          = 4.56%


     With this latest put option assignment, I now own 200 shares of RCI.B.

number of shares = 200
Total cost  = $4366.90 +$4208.90 = $8575.80

ACB/share = $8575.80 /200 =$42.88

Yield = $1.92 / $42.88
          = 4.478%

    Although the premium received after commissions was less than the option assignment fee, the overall cost basis is reduced on my overall position.  This purchase adds $192.00 to my annual dividend income based on the current annual dividend.  RCI.B is scheduled to pay a dividend in early July, so these 100 shares will not be eligible for the dividend as the record date as now passed.  My initial purchase in 2014 in which I missed the July dividend payment of 2014 as well.

I will update my investing portfolio spreadsheet in early July to reflect this new purchase.

Disclosure : Long RCI.B

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.


  1. I just saw that assignment fee now. What is that about? I think 25 Dollars is a big deal here where could save some serious dollars. It turned an income trade in a loss! For me, using IB there is no fee like that at all, did you consider that already?

    1. Butterfly Millionaire,

      The assignment fee to when the stock when selling puts or selling calls. For exercising the put or call (buyers) the fee is the same. When there is assignment of excercising the $24.95 applies in the currency of the trade. It use to be $12.95 but my brokerage increased it.

      When making this trade initially, I entered my info wrong apparently. I realize it immediately after I clicked sell. The order got filled instantly. The reason i am not with Interactive Brokers is due to the fact you need $10000 to open an account. I started with $1000 a few years ago.

      For comparison: TD Waterhouse charges $43 for an assignment or exercise.

  2. The minimum balance is a good point here. I also had to save for 10 years at first to get ready for the switch

  3. I love to read this Artcle . All the Point you are mention in your Post is very
    Informative ..!!
    stock options tips

  4. Sounds as if you sold short dated or front month puts on Rogers, and my question is why? If you really want to make the premium worthwhile why not sell longer dated puts and let time value work for you? It actually ended up costing you money to effectively put this trade on and get assigned.

    1. Case in point, you could have sold either the jan 17 42 or 44 puts for between 3.5,and 4.5 (maybe more depending on price of underlying when you put the trade on). Let's say you sold the jan 17 44's for 4.50. If you got assigned immediately after the sale, you lower your cost base to below 40 (after commissions).

      If you don't get assigned, you keep a "synthetic" dividend equal to the net premium collected. With a premium of $4, you've synthetically created two years of dividends at t=0.

      By selling short dated options, you're increasing the likelihood of assignment in return for low premium. All in my humble opinion of course.

    2. Daniel Austin,

      My plan was to sell the put for a higher premium, but I apparently made a mistake when entering the amount. I did not pay enough attention and clicked sell. I realized I made a mistake after clicking sell but before I could change it, it was filled. I actually tried to buy back the option on expiration day but my order kept getting rejected.

      I am considering doing longer dated options in the future, but it will depend on my financial situation and purpose of trade. For example, Telus was a $40 strike price put. That is the other trade from part #1. I was going to write covered calls on that one if it got assigned.

  5. I totally get it. The issue though, is not with the error in the order, I think it's with the premise of selling front month premium when it's not worth selling. By selling front month premium the problems are as follows:

    1) you sell to the m-x market maker's on their terms and at their spread. I've found that the m-x is abhorrently inflexible when it comes to trading in between the spread. For a stock like Rogers, you're still looking at $.10 to $.15 spread for most strikes. Maybe $.07 if you're lucky.
    2) knowing that the trade will cost you $10 + possible $25 if assigned, you have to clear premium of minimum $35 to make it worthwhile. With implied volatility of 13% in the front month, the premium will be small. Therefore you're forced to sell either at the $'s or slightly in the $'s.
    3) the market maker's price the options in real time using whatever proprietary model their firm uses (Black Scholes / binomial / hybrid?). By selling them front month, you have no edge - there is little chance of the options being mispriced

    By selling longer dated options, you increase the odds of possibly keeping the premium due to potential mispricing, BUT, you also increase your risk of loss if the stock moves against you significantly.

    If you sold the Jan 17 42's for $4.50, and the stock gets down to $30 at any time in the next 1.5 yrs, you're looking at a m2m loss of $1,200 less the premium written.

    I don't think there's an easy answer here to any of this.