We were assigned on the SMH 9 Sep 240 put in both our 50K and 10K Master Portfolios and are now long SMH shares in our account. If you are like us, you also received a margin call notice. No need to panic, there are 3 easy ways out of this situation.
Vaneck Semiconductor ETF (SMH): 205.50
TRADE OPTION 1 (Only if you were assigned): You can exercise your SMH 9 Sep 235 put. This will assign the SMH shares to someone else and effectively close the put side of your position. You shares will be put/assigned at 235 to someone else closing your long shares. You short 240 put is already gone and by exercising your 235 put you also close that position. You effectively closed the position for the value of the spread or a $5 loss per contract. Your call positions will expire worthless.
(Thinkorswim automatically exercised our 9 Sep 235 put for our 50K and 10K account around 10:00 AM … most brokers will do this for you if you don’t take action by a certain time after the market opens).
TRADE OPTION 2 (If assigned): Sell your shares of SMH and then sell your 9 Sep 235 put. Same as above, it will close all the positions for about the same $5 per contract. Your call positions will expire worthless.
TRADE OPTION 3 (If you were not assigned): CLOSE the entire SMH 9 Sep iron butterfly for about 5.00. Do not pay more than 5.00 for it as that is the value of the spread.
BTC the SMH 9 Sep 240 put
STC the SMH 9 Sep 235 put
BTC the SMH 9 Sep 240 call
STC the SMH 9 Sep 245 call