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Lost $30,000 on a $1-Wide Credit Spread (Options Traders MUST Watch This)

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market is designed at its core to steal money from retail traders
Comment from : @zj0000

greate video, it's finally good to find a video that emphasises the risk of the trade landing between the spreads, but this scenario if just totally out there and a hard one to anticipate
Comment from : @silverBullAU

Wow that's a crock isn't it? Every options book in the world should have a huge section on this problem the industry needs to fix this IMHO This scenario should simply be made impossible the long shouldn't live longer than the short, seems to me
Comment from : @flmason

Does this also happen if you have wide credit spread and you got early assigned days before expiry, and the stock stayed at the middle of the spread?
Comment from : @pinoyrunningpenguin

It has happened to me as well, even though stock was out of the money But I had owned the shares of the stock that I had call spread for, so, my stock got sold Luckily i was 50 up in my stock position also, the stock changed its direction and was able to buy it back cheap So no loss for me
Comment from : @8Kexperience

I thought max loss was the difference between the strikes (the spread) - Net Credit Received? How does the fact that he got assigned after hours change this?
Comment from : @BoxerDogs

I believe robinhood closes the position for you're about 30 minites before the closing bell if in I'm in the money on experation day
Comment from : @chleroeyes931

Thank you for sharing the great information I will remember always always sell my options before the expiration date Excellent information
Comment from : @yennguyen2951

Trade diagonal or calendar spreads instead of vertical spreads
Comment from : @won-suhnordquist7694

Seems like a case study warning about risks of trading on marginthanks for sharing
Comment from : @Hawke301

Thanks for being a greay teacher!!!!!
Comment from : @ciaranbrennan16

Wow😢
Comment from : @stephenoutram3926

This has a lot to do with the brokerage account also Brokerages also put in a do not exercise request into the clearance house in situations like this When an options is way OTM like this one was getting assigned after hours should have never happened
Comment from : @hvacguy11

this same scenario happen to me on the NDX, with a 30k loss also several times on stocks like bestbuy, tesla etc i always close short options now
Comment from : @dataatqcontinuumdejavu9954

So this guy was stupid enough to not close a trade and let is expire that was relatively close to the money on an individual high risk stock like tesla I always trade index SPX spreads and even though I have some trades that are 20 points OOM i still close and not let them expire Its better to be safe and not be too greedy for the last few cents
Comment from : @striderpops

No protection You need to make a video 📃 paper trading this walking through the mechanics of closing the trade
Comment from : @JBulsa

Never trade credit spreads 😢
Comment from : @JBulsa

Horrifying 😢
Comment from : @JBulsa

Hmmmmmm, I’ve been assigned and they’ve always let me execute my protective contract Even days later 🤔
Comment from : @Mom_Luvs_Tech

This is one reason why selling naked or cash secured puts/calls is safer than spreads It keeps your size smaller and avoids these risks
Comment from : @MM-do5yx

So the broker can liquidate your account to protect themselves, but not protect their customer who bought a put and paid their commissions Broker should automatically sell that put if it's after hours Important video I'll stick to covered calls with 100 shares of the stock to protect me or Poor Man's Covered Calls with the long call with a later expiration to protect me
Comment from : @JamesBond-le5wt

This almost happened to me this week, got lucky Lesson learned
Comment from : @Jeorgy92

So if you always close your credit spreads a day before expiration, this eliminates pin risk? Are there any other big risks like this to be aware of when selling credit spreads?
Comment from : @TaladranWoW

would that happen with credit spreads on SPX?
Comment from : @vladx3539

Best video for all who trade credit spreads Thank you so much
Comment from : @pramodgaikwad5500

Could the individual have rolled the spread strategy a few weeks? That's assuming he was informed in time to do so I'm also learning and just wondering if that could have also helped/worked
Comment from : @myomy2009

WOW! Thank you! I was interested in doing complex option trades not anymore!
Comment from : @Calendyr

takeaway here, don't let them expire Longer term option trades I close at 21 days DTE Closer than that I'm watching like a hawk and close early, win or lose
Comment from : @rousemkg

moral of the story is always close the short legs
Comment from : @bunbohue369

I had the same experience once but I didn't lose near that much money I ALWAYS get out of a spread before expiration
Comment from : @rogerfriedrich1670

I noticed the other day that I had some PLTR short Puts at 35 I think Late Friday afternoon, the stock price was 3520 or so And the option price was 060 or so ie closing the options was going to be expensive I didn’t care if I got assigned, and hadn’t seen this video, so I just let it ride Just surprised me that closing the puts was going to be that expensive
Comment from : @TrussttN01

What brokerage was involved?
Comment from : @TrussttN01

Just to confirm, this scenario would never occur with European-style, cash-settled options like SPX or RUT Is that correct?
Comment from : @arkady3seven

Can you explain more how you close the position please? Thank you
Comment from : @wissamgoro5079

what a 15mins of negligence can do to your portfolio For my case, it was about 50K in one day 10/13/2022
Comment from : @wolfu7264

Very good info , thank you 🙏🏻
Comment from : @rahulmenon3313

I've been in this situation before However, I was not able to close the option during trading hours Fortunately, the option never went into the money, so nothing happened
Comment from : @LG-tw5vm

Always close out all spread positions before expiration (debit or credit spreads) You don't want to get caught in no-man's land between the strikes, or in situations like this Closing out the positions eliminates much headache and grief Also, in this case, TSLA is notorious for a lot of after hours volatility, but any stock is subject to after market swings - all it takes is a bad news item or some tweet by the CEO to cause havoc, and your DOTM spread is suddenly DITM and you're in DS!
Comment from : @chrisguli2865

Well, used to save on commissions and let options expired Totally not worth it I been there, feel the pain 😢
Comment from : @thegoodoneist

So it no longer is a spread at the close?? And your just left with the shorted leg that can screw you? Seems ridiculous!
Comment from : @electronicweasel9083

Lost 30k on $1 dollar credit spread, that unreal It's only true if your bet is very big and that mean you're a very risky trader I don't think I want to learn your way because I trade credit spread very frequently and win 90 of the time because I always choose a low delta spreads I don't win big but i can make steady profit without high risk
Comment from : @nguoiviet4023

Thanks for the content, but I am confused, the 409 long put should be automatically exercised before 4:30pm Why does it require the trader to confirm this exercise? Thanks in advance
Comment from : @liaoweien

Fucking Schwab risk management would fail to do that Don't do options w Schwab
Comment from : @723lion

What if this poor guy had sent an exercise order for the P409 he bought as soon as the market was closed (ie 3:00 PM)? That way, the broker had to sent that exercise order to OCC before 4:30 PM, and the P409 would have been assigned to their writer as well, so he should have been protected Right? brbrIn other words, if you hold a long position (or leg) to expiration, make sure you ask to exercise it, just to make sure If it will end OTM, nothing will happen, but if, like in this case, it will end ITM, the other side (the option writer) will be assigned as well Is this true?
Comment from : @DDD-d1g

Newer trader here and you answered many of my questions Thank you for sharing this well needed info!
Comment from : @Screamindynos

But doesn't the broker automatically exercise your option if it is in the money?
Comment from : @Wendywonder123

I talked with Robinhood support and they told this can’t happen They will use the bought option call to cover it Who is right here?
Comment from : @varunbhatt6365

Even if the option was exercised after hours, why wasn't the closing price used to execute the trade instead of the after hours price? The option expires at market close and that determines weather it is in the money or not Lots of companies announce earnings after the close and the stock drops after hours If exercising after hours, at the after hours price was a thing, countless traders could get screwed that would otherwise be protected
Comment from : @FireLt2017

Trade SPX spreads, cash settled to avoid being assigned
Comment from : @ozzyguerra3073

Thanks for letting me know
Comment from : @robbywc

I had no idea about this thank you so much for this video You are the only one I’ve seen talk about this
Comment from : @anthonyturner8587

On TD Ameritrade broker this cannot happen because every option exipiring ITM get assigned automatically So in this case the loss would still have beed $500
Comment from : @Simo-ho1ml

correct me if i'm wrong, but this is called "Pin Risk" for those wondering
Comment from : @istoleyourpc6721

makes no sense for your option not to be exercised automatically when itm`
Comment from : @christarasnicolau6091

What a hell of a lesson today
Comment from : @DC-gy1zw

Could iron condor save the day?
Comment from : @64ytb

Good video sharing Those that always encourage credit spread never mentioned on this risk I just experienced similar things on short leg QQQ options get excercised and account face liquidation crisis luckily QQQ is quite calm on 2024/01/18
Comment from : @erekit

Isn’t there a max loss that can’t be surpassed?
Comment from : @lmaostrnoob

How does the selling trader know that this one buyer who exercised his option is the trader that bought his options?
Comment from : @garysizemore3729

👌
Comment from : @sergioLombrico

This is very educational, thank you! It makes no sense to me how this can even happen, but it did and that is why the video is so helpful!
Comment from : @thegreatestcomesfromthewor6929

Great information Chris! Thank youI had no clue!
Comment from : @JoeBanjo88

Great video and good looking out Very little discussion about this issue Another issue/challenge is the inability to close out positions, hence leaving you stuck & exposed!
Comment from : @cfb7000

This practice allowing share price after the close to affect expired options should be banned Options cannot trade after the close and market makers know this game too well If they simply banned all assignment of any expired otm option this game would cease to exist hurting traders
Comment from : @Giggidygiggidy12

I wouldn't touch Tesla with a stick Especially bull credit spreads
Comment from : @geeeee8268

That’s should be illegal
Comment from : @eyeservantez

Thank you for the video but I don’t understand why I must close the position especially if the position is in my favor If I close the position around the OTM, I lose money and if I don’t I lose more money What is the point of doing Iron Condors and/or Butterfly trades if I can’t make any money? It seems like it’s a waste of time and money I’ve had some issues with Vertical Bull Puts and Calls in the past, but I knew that if they went out of the money on DTE, I was going to make a profit I’m going to work on this in paper trading until I understand the concept of IC and IB Talk about paying the price haha but it’s the only way to get better
Comment from : @danielmiller1401

Is it possible for this to happen with index options that cash settle? Thanks
Comment from : @jimbarentine3539

Damn thing so volatile it changes prices every time Elon farts
Comment from : @davoinshowerhandle3302

The "opposing trader" or otherwise put the brokerage firm seeing that they can f u over and make money
Comment from : @FinTra_

Rule should just be fixed or not? What is the sense of accepting exercise after closing the market? 🤔
Comment from : @Jose_Lima

ALWAYS buy back your short units @05, for just this reason and also because you are floating insurance for the person on the other end of your trade that bought the put
Comment from : @joep3525

Thank you very much friend
Comment from : @jasonrich2090

👍
Comment from : @jasonrich2090

8:25 solution is to close options before expiration
Comment from : @Discovery_and_Change

Congratulations for the information you gave us
Comment from : @fotiosval

Excellent video Thanks for the heads up
Comment from : @johnsnow9232

Thats messed up Their broker screwed them The broker should have instantly exercised their option
Comment from : @_Dave_

It's god damn simple people: ALWAYS BE CLOSING
Comment from : @sunaxes

Either close before expiration or make sure the long option has a later expiration date which is well worth the extra cost
Comment from : @richardm654

What a disaster
Comment from : @greg1970c

Good video !
Comment from : @petkuscinta9797

I smell a rat here, if the $410 put could be assigned automatically how come the $409 put could not?
Comment from : @desolacapitalpartners

Is this guy still with tasty?
Comment from : @Dliammc

This entire video he doesn't even mention the shitty broker?
Comment from : @TheMadMariner

I am so grateful watching this video Thank you so much for making this video
Comment from : @yaoey

Before expiration, with the extrinsic value, the option is rarely exercised However, what if it does get exercised for any unknown reason, what is the solution? Can we exercise the other leg of the spread too to get out of trouble?
Comment from : @sophiewang123