Hey, hope everyone is doing well.
I traded options a while back doing the wheel and had to stop due to needing the money the account was initially opened with.
I have kept interest in the topic and even before I quit began to work in some credit spread trades.
Thinking about getting back into the game after I save up some cash and had question about brokerages. I do know that each brokerage is different and I’m personally leaning towards think or swim but I’m looking more for a general “What would happen”.
So here’s the scenario I’m curious about.
Let’s say hypothetically that Apple was trading at 200 per share. I do a put credit spread where I sell(1) the 195 and buy(1) the 190. No margin on the account.
I do so with an account that has lets just say 1,000 in it. I open one.
Then at the end of the contract or it gets early assigned with a stock price of 194.
So obviously I am obligated to by 100 shares at 195 or $19,500. But the account doesn’t have it in it. Does the brokerage automatically sell that stock and then charge you a fee? Or how does this work?
This is the one area of selling spreads that concerns me. I like the idea of slowly building an account this way and wanted to get everyone’s opinion on it.
Thanks in advance!