Fidug

Fidug t1_iy3fc3b wrote

I am confused here as well. His brokerage could have exercised his purchased put for him if it was in the money. Generally, you are correct that to be assigned, you have to sell the option, but some brokers will auto exercise for you if you are in the money at expiration. However, he would now be short (-100) shares and would need to buy back to cover the short. However, he would have received the money from the sale, then the brokerage would not allow him to short, so they bought back the shares at 180 (hence the 18K loan). I assume this is due to settlement of funds, but something doesn't sound right.

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