I'm struggling to understand the exact transactions that happen when a call option is assigned before expiry. I did not find this information after extensive searching so posting it here.
Assume that I have sold a call option at $ 260 for SPY ETF. Also, I do not have any SPY in my account but have sufficient margin and the call options were sold for $ 1 premium each for a lot of 100.
And if it matters, here is additional information - It was bought when SPY was $ 255 and today it is trading at $ 265. My understanding was that a) the brokerage would buy the stocks on my behalf and sell it to the person to whom the stock options were assigned. b) , so there would be a buy order for 100 SPY @260 and c) there would be another transaction (assignment?) for 100 SPY@260.
Will there be any transactions relating to the premium?
Thank you for any inputs
Submitted November 28, 2018 at 05:07AM by ramana2887 https://ift.tt/2E2dx6y