Can I be assigned if I "Sell to close" my option contract?

Question

Hi Everyone and thank you all for any response regarding this.

If I "buy to open" a naked(I don't own the shares) Call option contract as my first transaction, and the underlying stock rises or falls and so does my naked Call option contract, now I want to sell this contract because it has increased in value so I "Sell to Close" this naked Call contract, could I ever be assigned? Am I the writer in this case, basically I want to sell the contract with a profit or loss and not have to worry about being assigned, buying or selling stock. I believe if I sell to open I could get assigned but not in the case above. Thanks for any clarification on this.

Answer 1

<<<If I "buy to open" a naked(I don't own the shares) Call option contract as my first transaction, and the underlying stock rises or falls and so does my naked Call option contract, now I want to sell this contract because it has increased in value so I "Sell to Close" this naked Call contract, could I ever be assigned?>>>

No.

Once the closing transaction has taken place you no longer have any position, right or obligation.

FYI, the assignment process takes place after the market has closed. That means a short option position that is closed (with a "buy to close" transaction) cannot be assigned either.

<<<Am I the writer in this case, basically I want to sell the contract with a profit or loss and not have to worry about being assigned, buying or selling stock.>>>

No. You are only a writer if you sell to open.

<<<I believe if I sell to open I could get assigned but not in the case above.>>>

Correct. I will add that you are not allowed to simultaneously be long and short the same option contract, so your broker should not accept a "sell to open" transaction on an option you already own.

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In another response Shaun R said

"Just thought you would like to know. When you buy an option you do not open a naked position. Naked positions are when you sell an option without owning the stock, or an option to buy it. Sell to open is naked, Buy to open is not."

Although there are a fair number of other people who would agree with what he said, I believe  most option experts would disagree. Certainly at least one of the two most respected options authors disagrees.

From the glossary in "Options Volatility & Pricing" by Sheldon Natenberg:

Naked---A long (short) market position with no offsetting short (long) market position.

From the glossary in "Options as a Strategic Investment" by Lawrence McMillan:

Naked Option: see Uncovered Option

Uncovered Option: a written option is considered to be uncovered if the investor does not have a corresponding position in the underlying security.

Answer 2

If you buy a call and sell it you are not obligated to buy the stock.  Once you sell your calls you are out.

P.S.  Just thought you would like to know.  When you buy an option you do not open a naked position.  Naked positions are when you sell an option without owning the stock, or an option to buy it. Sell to open is naked, Buy to open is not.