Are IG Options Liquidated on Assignment

[AbsurdK]

Hiya - I am trying out a test account so no real money and was looking to experiment with wheel like strategies. I sold some A200 puts which were assigned however it seems rather than the resulting position being opened it was just liquidated at the loss on assignment. Am I missing something silly here?

[CharlotteIG]

On 23/11/2020 at 12:10, AbsurdK said:

Hiya - I am trying out a test account so no real money and was looking to experiment with wheel like strategies. I sold some A200 puts which were assigned however it seems rather than the resulting position being opened it was just liquidated at the loss on assignment. Am I missing something silly here?

Hey @AbsurdK, 

Thanks for your post. 

Sometimes if you're close to the deadline date the positions can close however if it's that close that it practically closed straight away that wouldn't be the case. 

Demo accounts can sometimes have issues as we put most of our resources into the live accounts however there were no known issues with them earlier this week. 

What I would suggest is emailing/ live chatting us so we can walk you through what happened. 
All the best

[cate]

Hi @AbsurdK and @CharlotteIG,

I'm also playing with the options on demo with the occasional foray into a real trade on my live account, so I may be completely wrong here, or have misunderstood the original question.

But isn't this just the behaviour you would expect with a cash settled option - on expiry you wouldn't receive the underlying A200 ETF or future. (I believe most index options are cash settled (apart from the S&P where you have the choice), and looking at the info tag on the A200 it seems that they definitely are.)

And now @AbsurdK you've got me googling wheel strategies... They're a fascinating asset class, aren't they?

Cate

[CharlotteIG]

23 hours ago, cate said:

Hi @AbsurdK and @CharlotteIG,

I'm also playing with the options on demo with the occasional foray into a real trade on my live account, so I may be completely wrong here, or have misunderstood the original question.

But isn't this just the behaviour you would expect with a cash settled option - on expiry you wouldn't receive the underlying A200 ETF or future. (I believe most index options are cash settled (apart from the S&P where you have the choice), and looking at the info tag on the A200 it seems that they definitely are.)

And now @AbsurdK you've got me googling wheel strategies... They're a fascinating asset class, aren't they?

Cate

This is absolutely correct, they do have an expiry. What I understood is that the position was opened and then instantly closed which shouldn't happen. But there is an expiry and if that's when it closed it's correct. 

@AbsurdK did you check the expiry before it opened. If not you can find it in the get info section next time. 

All the best 

[cate]

4 hours ago, CharlotteIG said:

This is absolutely correct, they do have an expiry. What I understood is that the position was opened and then instantly closed which shouldn't happen. But there is an expiry and if that's when it closed it's correct. 

@AbsurdK did you check the expiry before it opened. If not you can find it in the get info section next time. 

All the best 

As I understand it, after a bit of googling, the wheel option strategies that @AbsurdK is experimenting with depend on taking delivery of the underlying when the option expires. Google tells me "The process starts with selling a put. After selling the initial put, the put either expires or is assigned. If it expires, they keep the premium. If they are assigned, they take ownership of 100 shares."

I believe that this would work with single stock options, but index options are generally cash settled - in other words there isn't an underlying that you can "take ownership of". As far as I can see the only options on indices which are different are on the S&P, where you have the choice between SPX options (settled in cash since the underlying asset itself is not traded) and SPY options which are settled in shares since the underlying asset itself is traded on the exchange.

Thank goodness for demo accounts to experiment with, so that we can try to get our heads round all these details before putting real money at risk. 😀