# Outrageous cost of "assignment"



## DrMatt (Dec 11, 2011)

So I sold a covered call on RY in my scotiaitrade account and they gouged me with $65 in fees when the call got assigned... What is up with that?

Here's what I did (in my TFSA):

Bought 100 shares in Nov for $4533... Then sold an Apr call at 54 for $1.25 (in Jan) (received 113.76 in premium)... it was assigned last week... and they put $5345.01 in cash into my account... Which means they took $11.24 + $64.99 = $76.23 for doing almost nothing... basically moving electrons around... I only got $113.76 - $76.23 = $42.53 (plus the increase in value of the stock)... 

When it was "eTrade" assignments were a lot cheaper and cash balances earned some interest... I'm seriously thinking of switching brokers...

I'm thinking scotia bank is loving me right now.

Does anyone know if there is a cheaper way of doing this? 
(I suppose I should start by trading more contracts at a time).


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## GreenAvenue (Dec 28, 2011)

I have had so much **** with Scotia bank that I can only advise you to RUN! They might be the bank for you when you are a billionaire.


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## Causalien (Apr 4, 2009)

Whoa.. Really?
I'll call their costumer service on Monday to confirm this. If this is true, time for me to switch as well.


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## DrMatt (Dec 11, 2011)

Yep... I just called them! 

Me: "So, I have to put up with it, or move my money somewhere else?"... 
Him: "Yes, sir! Is there anything else I can help you with today?"


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## Causalien (Apr 4, 2009)

What's factored into the $76.23?

I am guessing two commissions of $19.99 for buying and selling stock one for getting rid of the option and... forex?

This sounds like a classic buyout your competitors and then jack up the price (in the wake of past 5 years of broker buyout).

In any case, a good time for me to start exploring other brokers.


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## caricole (Mar 12, 2012)

I think they made a mistake somewhere in the assigment cost

Before, it was the cost of a telephone order, but a few months ago that cost came down

I was assigned 1.000 shares with TDW...cost 43,00$

I was assigned 500 shares with ITrade...cost 43,00$

The cost of the options seems OK

9,95 basic plus 1,25/option

1 option = 11,25$ = 11¢/share

Me, 5 options = 16,25 = 3½¢/ share

Me 10 options = 22,25 = 2¼¢/share

Someone complaint about the cash not giving interest

If you open a «CASH OPTIMISER ACCOUNT» it will give you SOME interest....just move the cash from margin account to cash optimiser...back and forth...at NO COST

I do not DEFEND or represent ITrade...on the contrary....with the changes they made I find it lamentable

They have a long way to go to match TDW on clarity and conviviability,plus their marketing announcement when you open your account

Nothing of this on TDW...only business related to your account

Hope a call will straighten this out....65$ makes no sense for 100 shares assigment

my opinion :02.47-tranquillity:


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## caricole (Mar 12, 2012)

Causalien said:


> What's factored into the $76.23?
> 
> I am guessing two commissions of $19.99 for buying and selling stock one for getting rid of the option and... forex?


The only things that can be factored in...veryfiable with the orders executions they better be on hand when contacting customers service

1) Buy 100 shares....9,95

2) Sell 1 option...11,25

3) Assigment of 100 shares....43,00

Nothing else, when an option is exercised...it évaporates from the account AT NO COST

my opinion


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## Causalien (Apr 4, 2009)

I am really appalled at what you guys are paying to deal with options on the Canadian side. Seems more and more like a nightmare to me.


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## humble_pie (Jun 7, 2009)

these are all separate transactions:

1) bought 100 ry in nov/11
2) sold 1 april 54 call in jan/12
3) option was exercised & stk was assigned in april/12

each transaction should & would have its own separate commission.

investor might be considering the total return in his own mind, but he should understand that what he has actually done is a series of separate transactions.

the commission for the final exercise transaction appears to be 54.99 (100 shares @ 54 = 5400.00 less cash rec'd 5345.01 is 54.99)

a 54.99 commission for a 100-share assignment does seem too high. Perhaps the OP might inquire again with a different representative. The standard formula for exercise would be the agent-handled commission for the stock assignment transaction, subject to a minimum assignment fee.

however, different brokers have vastly different assignment commissions. All option traders should learn in advance what these commissions are going to be.

BMO investorline, for example, has high assignment commissions. From this thread, it appears that scotia itrade may have as well.

td waterhouse, as noted upthread, charges a flat fee of $43 per assignment, no matter how many shares are involved.

of course, IB clients have it best of all. There is said to be no assignment fee or exercise commission whatsoever at IB.

the other issue is why this OP let things get so far along without doing anything to rescue his RY shares by preventing assignment. RY is a hi-quality dividend-paying stock, so for a short call seller it's a holder & a keeper, not a quick trade candidate.

the OP knew from the get-go in january, when he sold his call, that the counterparty would call away his 100 shares if the price of RY on the 3rd friday in april was higher than $54. Apart from monitoring his RY position constantly, the time to have acted was back in late march or early april, during a day of sharply falling RY share prices.

there's a useful lesson for option newcomers here.


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## Ethan (Aug 8, 2010)

I think Humble Pie has it right. I'm also with iTrade, assignment fees are $45. They also charge you a trading commission when assigned.

$45 assignment + $9.99 trading commission = $54.99


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## humble_pie (Jun 7, 2009)

Ethan said:


> I think Humble Pie has it right. I'm also with iTrade, assignment fees are $45. They also charge you a trading commission when assigned.
> 
> $45 assignment + $9.99 trading commission = $54.99


ethan are you sure about that trading commission tacked onto a $45 assignment fee ?

_*too much *!_

i'd say the industry bar is tdw's $43. Other brokers should match that. Traders who expect numerous assignments should go to IB. I'm an assignmentphobe, perhaps have 1 assignment every 300 or 400 trades, so it's not an issue for me. But scotia, at $54.99 for an ordinary call assignment, is clearly trying to squeeze blood from stones.

i recently got bmo to reduce its idiot assignment fee to the tdw $43 charge, when i wanted to exercise a call option that i was holding long. What works is to negotiate this ahead of time, not after the assignment occurs.

but the better solution, for the short call holder, is to skip nimbly out of harm's way in plenty of time. OP could have rolled his short apr 54 forward for a mere pair of commissions at 11.25 each, 22.50 total.


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## DrMatt (Dec 11, 2011)

Ethan said:


> $45 assignment + $9.99 trading commission = $54.99


yes, complete brain fart on my part... 55 not 65... number crunching has never been my strongest asset...
"Dammit Jim I'm a doctor, not a mathematician!"

Couple of things though: 
Caricole: I was watching the call for a buy-back opportunity that never arose... And i was fine with the strike price for assignment... All-in it was still profitable and a respectable annualized return... (Plus, now I've got some cash to play with and I'll probably buy back into RY on the coming downturn!)... To be honest though, I thought the assignment fee would be $45 (didn't know they also added a trading fee, and then thought it had gone up even further when I screwed up my math)...

About the "cash optimizer" ... This transaction took place in my TFSA... I can't move cash out of there... So it sits... With zero growth... that is just mean on the part of the broker!!

Does anyone have any suggestion for cash inside a registered account?

And lastly... I'm thinking scottrade.com, lowtrades.com, or choicetrade.com... But I need to finish my analysis (I might need to hire someone to double check my math though). 

What I might do is stop selling calls on my smaller positions (better if 5-10 contracts, but even then, percentage-wise, it's robbery! Wish there was a better way!!!)


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## DrMatt (Dec 11, 2011)

humble_pie said:


> ethan are you sure about that trading commission tacked onto a $45 assignment fee ?
> 
> _*too much *!_
> 
> ...



Agree... "too much!!"

But i have a question about "rolling it forward"... So in my example, i would have had to buy it back at a huge loss because the call price had tripled right after I sold it and never came back down (it was still trading at almost twice what I sold it for on the final day, because the underlying stock was over $2 higher than the strike price)... Would you have bought it back anyway? And then sold say a $56 or $58 later that same day? 

And is that even possible inside a TFSA where "uncovered" options aren't allowed? (I.e. the buy back wouldn't have been completed in time to sell another covered call on the same position on the same day!)


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## caricole (Mar 12, 2012)

> DRMatt....But i have a question about "rolling it forward"... So in my example, i would have had to buy it back at a huge loss because the call price had tripled right after I sold it and never came back down (it was still trading at almost twice what I sold it for on the final day, because the underlying stock was over $2 higher than the strike price)... Would you have bought it back anyway? And then sold say a $56 or $58 later that same day?


In your case, for a registered account, it is wise to have some cash on hand if you want to do a rollover

Probably 300$ would have done the trick

I dont know the exact price but lets say on Friday morning or the day behore, you buy your call back at 2,50 (plus commissions)

After confirmation of the trade...you sell immediatly a call further down the road at a higher strike...but at the same price or slightly higher as you buyback price you just completed

Lets say a 6 months, strike 56....for 2,65

1) If you get exersised in 6 months, you get 2 dividends plus 2,00$ more on a 55$ stock (do you math)

2) In a case like this, registered account, you dont worry about the TEMPORARY LOSS ON THE OPTION...because it includes a bigger gain down the road, whether expired or exercised in 6 months

3) If you do the math PER SHARE it becomes simple...
100 shares + 1 option + exercise =9,99 + 11,25 + 43,00= 64,24 = 65¢/share
500 shares + 5 options + exercise 9,99 + 16,25 + 43,00 = 69,24 = 14¢/share
1.000shares + 10 options + exercise = 9,99 + 22,25 + 43 = 75,24 = 7,5¢/share

If you can scoop up one or two dividends before you get exercised...some more gravy in the pocket

Loock docter...it is part of the schooling everyone goes (went) thru...after a couple of year you will get it :encouragement:


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## humble_pie (Jun 7, 2009)

first, i'm not caricole, i don't own a hat near as cute as his.

second, of course there were buy-back opportunities. An investor would have had to go as far out as the januaries to obtain any worthwhile premium for a higher strike, but it was available to you all along.

for example, right now an investor who is short may 54s in RY could easy roll up to january 56s, with a small credit to boot. It's sunday so there are no prices, but it looks like a credit of .55 possibly .60. This would more than pay for the commissions, plus it would position the underlying stock at the higher value of $56 instead of 54.

this move would be useful if investor believes RY will stay stronger. If investor is convinced RY will fall, the option to sell would be the jan 54, or lower if truly bearish.

as for rolling over such a tiny spread (one contract) in a restricted registered account, i imagine this could be difficiult to do at low cost.

rollovers normally are done together. They are like fast currency gambits or any other kind of pair trade. I do these online, one right after the other, which means that a tiny risk window is open for a few seconds between trades.

however a registered account without extra cash to buy back the short option requires handling by a licensed rep at most brokers. This could raise the spectre of full agent-handled commissions. Possibly north of $80 for a simple buy/sell rollover of one contract in RY.

i've never had a scotia account, have no idea how they behave. What i would expect, from a decent broker, is that the client wishing to carry out a rollover spread in his tfsa could execute the buy-to-close side online at the reduced web commish, while the licensed rep would immediately execute the sell-to-open side, also at the web commish. This is another situation that should be negotiated ahead of time.

next, please don't go to unheard-of low-cost schmoo brokers. Their service is likely to be terrible. Just getting someone on the phone could take hours. TDW is an excellent broker for options - knowledgeable, fast in execution, good service. The alternative is lower-cost Interactive Brokers, but they do not offer registered accounts.

(hint: in my experience tdw is a broker where you could negotiate the half-online-half-rep-handled-at-web-rates spread commission that i mentioned above. The ace up your sleeve is that the sell side of an option spread pair cannot be instantly done online in their system.)

(hint: move all your accounts. If the total is still below a new broker's 50k minimum, lean heavily upon your profile as an MD.)

lastly, your question about where to temporarily place cash in registered accounts. Some brokers offer HISA type accounts such as renaissance in registered accounts. These presently are paying about 1.25%, somewhat less than the HISA accounts that an investor can set up directly, outside a registered account.




DrMatt said:


> Does anyone have any suggestion for cash inside a registered account?
> 
> lastly... I'm thinking scottrade.com, lowtrades.com, or choicetrade.com.


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## dotnet_nerd (Jul 1, 2009)

Another option (hehe pardon the pun) is to simply buy ZWB, it's a Canadian bank covered call fund.

It's been discussed at length on other threads, something worth looking into.

http://www.etfs.bmo.com/bmo-etfs/glance?fundId=83031


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## HaroldCrump (Jun 10, 2009)

dotnet_nerd said:


> Another option (hehe pardon the pun) is to simply buy ZWB, it's a Canadian bank covered call fund.


Hmm...paying 0.65% fee month-after-month to avoid a $65 trading + assignment cost?
How is that a better deal?


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## dotnet_nerd (Jul 1, 2009)

HaroldCrump said:


> Hmm...paying 0.65% fee month-after-month to avoid a $65 trading + assignment cost?
> How is that a better deal?


_How is that a better deal?_ Is that a serious question?

What percentage do you think the OP is currently paying?

Edit: I'll answer my own question.

He invested $4533. He was gouged $76

That's 76/4533 or 2%. For 5 months (Nov-Apr). ZWB charges .65% PER YEAR


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## caricole (Mar 12, 2012)

dotnet_nerd said:


> Another option (hehe pardon the pun) is to simply buy ZWB, it's a Canadian bank covered call fund.
> 
> It's been discussed at length on other threads, something worth looking into.
> 
> http://www.etfs.bmo.com/bmo-etfs/glance?fundId=83031


Any attempt to hijack the original subject of the post with the CRAPPY BMO FUND is very questionable

You are trying to compare apples with oranges:stupid:

Just the name of the fund is INTENTIONALLY MISLEADING, it has nothing to do with DIY covered options trading

After having opened an account with BMO Direct trading....it toock about one month to find out how crappy they are and I transfered elswhere

Keep playing around with YOUR FUNDS, before medeling in covered options trading post

my opinion


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## humble_pie (Jun 7, 2009)

mers & costs have nothing to do with the price of chicken in this case.

the only thing to compare are the 2 total returns.

dr. Matt's return included the dividend he received when he bought RY, sold 1 april call, rec'd 1 dividend in february, then sold RY following assignment in april.

doctor's overall return in this exercise, including capital gains & the solitary dividend, was roughly 22%.

ZWB, on the other hand, performed startlingly worse. From mid-november to 3rd friday in april its price rose from 13.54 to a mere 14.54.

investing the same $4533 that dr. Matt used to buy his RY in november would have bought him 334 units of ZWB. Over the same span of time, he would have collected .47 per unit in monthly distributions, for a total distribution of 157.00.

his 334 units gained $1 each, or $334. Total distribs + cap gain are therefore 157 + 334, or $491. This meagre return would have yielded only 10.83% to dr. Matt if he had invested his $4533 in ZWB last november.

here's how it hung in the end:

- owning RY outright + short call = 22% return in less than 6 months.
- owning ZWB = 10.83% return in the same time frame.

i'm interested to post these figures up because when ZWB & its tsx 30 cousin HEX first appeared, i used to post regularly here in cmf forum that i had doubts about their too-close-to-the-money strategy & the trading frenzy it would trigger.

i used to post that i had purchased a small amount of both new etfs in order to compare results with my own strategy, which is quite different.

and i used to post ways in which the managers could have inflated the distributions in the early months in order to attract volume business.

now all the proof is in.


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## humble_pie (Jun 7, 2009)

caricole i agree bmo investorline is not too good with options ...

but keep this under your hat each:


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