So I bought two long calendar spreads with the expectation that the maximum loss would be the difference between the premiums ($400 at this time).
I was quite excited because as long as I can sell the spreads right now, I only lose about 30 dollars. The price is indeed between the spread breakeven points, so I thought I would be making a profit, but then someone noted that I could be assigned the short call. Since the strike price is 750, it’s my understanding now that I could be assigned to buy and sell $75000 worth of stock early due to overnight gains.
So. I’m very scared, because I didn’t even consider this possibility. On paper if I sold the spreads I would lose just a little bit of my original premium. I thought I was being responsible But it looks like I could be forced to pay 75000 on the short leg, even though the most I can sell the premium for is $2398.00.
So two questions:
One, how likely am I to be assigned on open before I can sell the spreads?
Two, if I’m assigned and can’t sell the spreads, what would happen then? I can’t possibly cover the short at this time and I feel awful.
Looking for practical kind advice please.
