Identifier: C4T6L5 | Revision: 2026-10-26 | Planned study: 10–15 minutes, excluding extended practice.

Decision and objectives

Choose whether the method addresses this lesson’s task before placing an order. Objectives: 1. Reconstruct actual exposure from partial fills. 2. Quantify funding after unmatched delivery. 3. Choose a response that restores the authorized risk limit.

Prerequisite: C4T6L4.

All numbers, quotes, contract terms and dates in the case are hypothetical teaching assumptions, not a listed series or offer. Unless varied below, options are European, expire together in 90 calendar days, are cash settled in TRY, and use 100 underlying units per contract. Premiums are TRY per underlying unit, paid at entry; signed quantities identify long (+) and short (−) legs. Assume no distributions and zero financing for the isolated payoff, no holiday adjustment, and final cash on the next business day. Actual tax is excluded, not assumed zero.

Mechanics

Actual holdings determine risk, not the intended package. A protective leg may fail to fill, trade at another size, expire earlier or be adjusted differently. A short American-style option can be assigned while the long option remains open. That exercise-style comparison is international and does not imply American early assignment for the declared domestic European examples. European contracts still have expiry delivery and instruction mismatches. A trade plan must specify what to do when the package cannot be completed.

Price and return drivers

Write a signed inventory after every fill, assignment and exercise. For physical calls, a short assignment requires delivery and receives strike cash; a long-call exercise requires strike funding and receives shares. Borrow recall, settlement timing and a halted underlying can prevent immediate offset. Intended terminal spread width does not describe the temporary naked position. A stop order is an instruction subject to execution conditions, not a contractual loss cap.

Worked case

Intended synthetic European cash-settled bull spread: +1 K100 call at8 and−1 K110 call at3, multiplier100, expected net debit500, expected total charges40. The short fills first; long purchase fails. Actual position is−1 K110 call, credit300, current single-leg total closing charges20. At expiryS90,110,150, actual net is+280,+280,−3720. The intended completed spread would have yielded−540,+460,+460. The failure replaced a finite debit risk with an unbounded upper loss. The inventory must therefore be corrected promptly using authorized actions rather than presented as a completed spread.

Adverse case

Before expiry atS130 the naked call close ask22 costs2200: realized net=300−2200−20=−1920. This differs from its expiry intrinsic20. A separate explicitly American physical example has short1 K100 call assigned while a long K110 call remains open. Delivering100 shares borrowed at currentS120 entails12000 market value against10000 strike receipt. Exercising the K110 long requires11000 and sacrifices any remaining time value; whether that is operationally possible depends on its style and instructions. AtS90,100,130 a later long right alone cannot retroactively remove the prior funding need.

Practical use

Track fills and exercise notices by exact series. Domestic European deadlines come from domestic documents; the American example and OIC procedures are explicitly a style comparison.

For any actual domestic implementation, verify the exact issue/contract, authorized intermediary, account permission and executable size. Include spread, commissions, passed-through fees, funding/borrow, custody and exercise/exit costs without double-counting embedded charges. Recheck income year, residency/status, issue/acquisition dates and effective tax law; all case results remain before actual tax.

Decision boundaries

Build the permitted execution process around the risk budget: use a verified package facility if available, otherwise predefine acceptable leg order, size and an immediate resolution procedure. Buying the long wing first can avoid naked short exposure but still leaves price and execution risk. Decline when incomplete execution cannot be tolerated or funded. Check actual notices and deliverables after corporate actions. Do not copy US assignment deadlines or allocation procedures into a Turkish account plan.

Practice and references

Exercise: intended put credit spread shortK100 and longK90, one each, multiplier100, premiums6 and2. Solution: Only short fills. At expiryS60, actual gross loss before fees is600−4000=−3400; completed spread gross would be400−1000=−600. Protection failure adds2800 loss in this state. The missing leg’s hypothetical200 price is not a paid cost in the actual ledger.

Takeaway: Actual fills and delivery notices govern exposure; an unfilled protective leg provides no protection. Reference links: product card, formula; glossary: Partial fill; Assignment mismatch; Temporary uncovered exposure. Next: C4T7L1. Topic test.

Sources: Borsa Istanbul: Settlement Method (retrieved 2026-10-26; Settlement by contract family). Options Industry Council: Options Assignment (retrieved 2026-10-26; American-style assignment and partial assignment). GIB: Provisional Article67 Guide for Individuals (retrieved 2026-10-26; Sections1,3–9 and19; publication introduction). Revision 2026-10-26; recheck changing terms before publication.

Shared reference guide | Class examination