qqq option assignment

Option Trading In QQQ: 15 Things You Should Know

Options trading is popular, and especially retail traders enter the options market at market bottoms and tops.

We frequently receive questions about how to trade options, in both QQQ and SPY. Below is a short summary of the most frequently asked questions about options trading in QQQ.

Table of contents:

Are there options on QQQ?

Yes, the QQQ options market is huge. Thousands of contracts are traded each day. Moreover, it’s a wide variety of strike prices and future expiration dates. QQQ options are one of the most traded and the ETF itself is one of the oldest still trading.

How to day trade QQQ options ?

Perhaps to your disappointment, we don’t have any recipe to day trade QQQ options profitably.

Day trading is hard – very hard. It’s tough in stocks and futures, but even harder in trading due to more professional players than in stocks (for example).

Day trading is, in practice, a zero-sum game, and derivatives (like options) are a 100% zero-sum game.

• Is the market a zero-sum game?

We believe day trading QQQ options is a bad idea for 99.9% of all traders.

How do you master QQQ options?

To master !!! options you need to have a plan and you need to have a full understanding of how options are priced, both in theory and in practice.

Most don’t even reach the starting line because they don’t fully understand all the nuances with options (delta, gamma, vega, etc). If you don’t know the theory, how are you going to make money?

Predicting the correct market direction of the underlying security might not be enough to offset time decay, either. Do you know the effects of time decay? If not, you’ll end up losing (in the long run).

The most important thing is to have a trading plan. What are you going to trade? Why are you going to trade? What is your strategy?

The most important is to have a statistical trading edge . The only way to find out if you have a statistical edge is to backtest ( what is backtesting ?) If you are new to trading and backtesting, you might be interested in our inexpensive backtesting course:

QQQ options settlement time?

As an options trader, you don’t need to be concerned about the QQQ options settlement time.

However, according to NASDAQ, the expiration time is:

The time of day by which all exercise notices must be received on the expiration date. Technically, the expiration time is currently 11:59 a.m. [Eastern Time] on the expiration date, but public holders of option contracts must indicate their desire to exercise no later than 5:30 p.m. [Eastern Time] on the business day preceding the expiration date.

Can you trade QQQ options 24 hours?

You can trade QQQ for more or less 24 hours. CBOE Options Exchange offers 24-hour trading, but only for five days a week.

QQQ options, on the contrary, only trade from 8:15 to 04:15 ET.

Can you trade QQQ options after hours?

No, you cannot trade QQQ options after hours. As indicated in the last FAQ, you can only trade options until 04:15 ET.

On what exchange trades QQQ?

The QQQ trades on the Nasdaq exchange. However, you can buy and sell via many electronic exchanges.

What is the Q QQ Wheel Trading Strategy?

The QQQ Wheel strategy is a very simple strategy or system where you constantly sell QQQ puts and receive the premium. This has theoretically been shown to beat the index, but keep in mind that it involves taxes (unless deferred), commissions, and slippage.

Please read our older articles:

• What Is Slippage?
• The Wheel Trading Strategy

How are QQQ options taxed?

Taxes on QQQ are sourced to the country where you reside. If you reside in Sweden, Sweden might tax your profits – depending if you have a tax-deferred account or not.

The best strategies can be found in our….

Strategy shop.

Backtested trading strategies

However, taxes are complicated and US citizens are liable to US taxes wherever they reside. Moreover, tax treaties might also dictate where you should pay taxes. We recommend using a tax advisor if you are uncertain, even though they are terribly expensive to consult.

What time do QQQ options start trading?

QQQ options start trading during regular trading hours: 0930-1600 Eastern time.

When did QQQ options start trading?

QQQ started trading on the 10 th of March 1999. It’s one of the oldest ETFs still around. (The oldest is SPY.)

QQQ options started trading in 2001.

What time do QQQ options expire?

QQQ options expire quarterly, monthly, and weekly.

Can you swing trade QQQ options?

Of course, you can swing trade QQQ options, but our comments made earlier in the article is also valid for swing trading options: It’s extremely difficult and most people fail to make any money.

• Which Is The Best Indicator For Swing Trading?

Can you scalp QQQ options?

Yes, you can scalp QQQ options. However, yet again, scalping is a waste of time and money . You are unlikely to make any money. You are competing against players that are much better capitalized and equipped than you are.

What are the QQQ options trading hours ?

The QQQ options trading hours are from 0930 to 1600 ET.

Absolutely, the QQQ options market is not only substantial but highly active. Thousands of contracts are traded daily, offering a diverse range of strike prices and expiration dates. The QQQ ETF itself is one of the oldest still actively traded.

How do you master QQQ options trading?

Mastering QQQ options trading requires a comprehensive plan and a deep understanding of option pricing theory and practice. The content underscores the importance of knowing the nuances of options, including factors like delta, gamma, and vega, and highlights the necessity of having a statistical trading edge, validated through backtesting.

What is QQQ options settlement time?

For options traders, the content clarifies that the expiration date is not a major concern. However, NASDAQ specifies that exercise notices must be received by 11:59 a.m. Eastern Time on the expiration date, with an additional deadline of 5:30 p.m. Eastern Time on the business day preceding the expiration date for

What factors influence the pricing of QQQ options?

Factors that influence the pricing of QQQ options include:

• Underlying Asset Price : The current price of the QQQ ETF significantly impacts the value of its options.
• Volatility : Higher volatility typically leads to higher option premiums as there is a greater likelihood of significant price movements.
• Time to Expiration : Options with more time until expiration generally have higher premiums due to increased potential for price changes.
• Interest Rates : Changes in interest rates can affect the cost of carrying positions and thus influence option prices.
• Dividends : Ex-dividend dates and dividend amounts can impact option prices, especially for options expiring around these dates.
• Market Sentiment : Overall market sentiment and investor expectations can affect demand for options, influencing their prices.

Are there any specific risks associated with trading QQQ options?

Trading QQQ options carries specific risks that investors should be aware of. Notably, the inherent volatility of the Nasdaq-100 Index, which the QQQ tracks, can amplify both gains and losses. Additionally, options trading involves leverage, potentially magnifying losses beyond the initial investment. Moreover, factors like changes in interest rates, market sentiment, and geopolitical events can significantly impact options prices, adding further risk. It’s crucial for traders to conduct thorough research and employ risk management strategies to navigate these potential pitfalls effectively.

What are some common mistakes to avoid when trading QQQ options?

When trading QQQ options, it’s important to avoid some common mistakes:

• Don’t overlook liquidity: Ensure the options you’re trading have sufficient trading volume to facilitate smooth entry and exit.
• Don’t ignore implied volatility: Be mindful of changes in implied volatility, as it can significantly impact option prices.
• Don’t neglect risk management: Set clear stop-loss levels and manage position sizes to mitigate potential losses.
• Don’t chase momentum blindly: Avoid FOMO (Fear of Missing Out) and conduct thorough analysis before entering trades.
• Don’t forget about timing: Consider the expiration date and the timing of market events when selecting options contracts.

How do implied volatility and historical volatility affect QQQ options?

Both implied volatility and historical volatility play crucial roles in determining the pricing and behavior of options on QQQ, which is an exchange-traded fund (ETF) tracking the performance of the Nasdaq 100 Index. Implied volatility reflects the market’s expectations of future price movements and is a key component of option pricing models. When implied volatility is high, options tend to be more expensive, reflecting the increased uncertainty and potential for larger price swings. Conversely, when implied volatility is low, options are cheaper as market participants expect less significant price movements.

On the other hand, historical volatility measures the past price fluctuations of the underlying asset, in this case, the QQQ ETF. It provides insights into how much the asset has moved in the past and helps traders gauge the potential range of future price movements. Options traders often compare implied volatility with historical volatility to assess whether options are relatively cheap or expensive. If implied volatility exceeds historical volatility, options may be considered expensive, suggesting potential opportunities for selling. Conversely, if implied volatility is below historical volatility, options may be deemed cheap, presenting potential opportunities for buying.

In summary, implied volatility and historical volatility impact QQQ options by influencing their pricing and providing insights into market expectations and past price movements. Traders and investors monitor these metrics closely to make informed decisions about trading options on the QQQ ETF.

What are the advantages and disadvantages of buying versus selling QQQ options?

Advantages of buying QQQ options include potential for high returns with limited initial investment and the ability to profit from both upward and downward movements in the QQQ index. Additionally, options provide leverage, allowing traders to control a larger position with a smaller amount of capital.

Disadvantages of buying QQQ options involve the risk of losing the entire premium paid if the options expire out of the money. Timing is crucial, as options have expiration dates, and if the underlying asset doesn’t move as anticipated within the specified timeframe, the option may lose value rapidly due to time decay. Moreover, options trading requires a good understanding of market dynamics and option pricing, which can be challenging for inexperienced traders.

How does the performance of the overall market influence QQQ options?

The performance of the overall market significantly influences QQQ options. When the market experiences a bullish trend, QQQ options tend to increase in value as the Nasdaq-100 index, which QQQ tracks, typically rises along with the broader market. Conversely, during bearish market conditions, QQQ options may decline in value as the index faces downward pressure. Therefore, understanding market trends and sentiment is crucial for assessing the potential movements of QQQ options.

What role does market sentiment play in QQQ options trading?

Market sentiment plays a crucial role in QQQ options trading. Sentiment reflects investors’ attitudes and beliefs about the market, influencing their decisions to buy or sell options. Traders often gauge sentiment through various indicators like put/call ratios, volatility indexes, and social media sentiment analysis. Understanding market sentiment helps traders anticipate potential price movements and adjust their options strategies accordingly, aiming to capitalize on market trends and sentiment shifts.

How do dividends impact QQQ options pricing and trading strategies?

Dividends affect QQQ options pricing and trading strategies by influencing the underlying stock’s price movement and the option’s intrinsic value. When dividends are declared on the stocks within the QQQ ETF, the stock price typically drops by the dividend amount on the ex-dividend date. This decrease in stock price can impact the value of options tied to QQQ, particularly for call options.

Traders often consider dividends when planning their options strategies, as they can affect the timing and profitability of trades. For instance, options traders may adjust their positions to account for expected dividend payments, such as avoiding short call positions just before ex-dividend dates to minimize potential losses from dividend-related stock price drops. Overall, understanding the impact of dividends on QQQ options is crucial for devising effective trading strategies in the options market.

How do macroeconomic factors, such as interest rates or geopolitical events, affect QQQ options trading?

Macroeconomic factors like interest rates and geopolitical events can significantly impact QQQ options trading. When interest rates rise, it can lead to higher borrowing costs, potentially dampening corporate earnings and investor sentiment, affecting QQQ option prices. Geopolitical events, such as trade tensions or conflicts, can introduce uncertainty into the market, influencing investor risk appetite and thus impacting QQQ options trading volumes and volatility. Therefore, staying informed about these macroeconomic factors is crucial for making informed decisions in QQQ options trading.

What are the different strategies for hedging risk when trading QQQ options?

Strategies for hedging risk when trading QQQ options typically involve various techniques to minimize potential losses. One common approach is using options spreads, such as buying protective puts or selling covered calls, to offset downside risk while still allowing for potential gains. Additionally, traders might employ diversification by spreading investments across different asset classes or sectors to reduce overall portfolio volatility.

Another strategy involves setting stop-loss orders to automatically sell positions if prices reach predetermined levels, limiting potential losses. Finally, some traders may use technical analysis or quantitative models to identify optimal entry and exit points, helping to manage risk effectively in QQQ options trading.

How do you select the appropriate expiration date and strike price when trading QQQ options?

When selecting the appropriate expiration date and strike price when trading QQQ options, it’s essential to consider factors such as your investment objectives, risk tolerance, and market outlook. Determine whether you’re aiming for short-term gains or have a longer-term strategy in mind. Assess the volatility of the underlying asset and the overall market conditions.

Additionally, analyze any upcoming events or catalysts that could impact the QQQ ETF. As for strike price selection, balance the desired level of risk and potential reward. Out-of-the-money options offer lower upfront costs but require larger price movements to become profitable, while in-the-money options provide more immediate intrinsic value but at a higher premium. Experiment with different combinations to find the optimal balance for your trading approach.

Final thoughts on options trading in QQQ

Options are complicated, and we advise retail traders to stay away from trading options unless you know very well what you are doing. The most important thing in trading is to have a statistical edge.

The options market is much more a market where institutions trade and hedge their positions. We believe you are better off trading stocks and futures.

If you still want to trade QQQ options, then make sure you spend a lot of time understanding the pricing and dynamics of options.

I’ve got an Msc from Heriot-Watt University, Edinburgh (1996), in addition a to a business administration degree the Norwegian School of Management (BI – 1994). Did my mandatory military service in between.

After university, I worked two years as an auditor (1996-1998).

I co-founded Aksjeforum.com in 1998/99 - one of the first websites about trading and investing in Norway. It was later acquired by Digi.no in 2001.

I have written 4 books about trading (in Norwegian). One of them has sold 30,000 copies, a record for a financial book in Norway.

From 2001 until 2018 full-time independent prop trader (Series 7 in 2001) and investor.

2018-today: Investor, writer, analyst.

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Invesco qqq trust (qqq).

In The Money

Related Tickers

Learn this QQQ Options Trading System

Learn this QQQ options trading system if you want to gain exposure to NASDAQ 100 stocks. The Invesco QQQ Trust (QQQ) is one of the best ways for traders to gain diversified access to the growing tech sector. Between investing with index ETF and QQQ trading strategy  we chose the second. Throughout this trading guide, you’ll also learn our QQQ swing trading system that has low drawdown.

The coronavirus stock market fallout has spawned many rare investment opportunities. The QQQ that tracks the NASDAQ 100 stocks can be used by investors for both defensive and growth trading opportunities.

If you’re a long term investor, QQQ ETF is an ideal buy and hold.

What is QQQ Options Trading?

Invesco QQQ is an Exchange-traded fund (ETF) that tracks the NASDAQ 100 stock index. In other words, QQQ tries to replicate the performance of the stock index NASDAQ-100. Along with the SPY, the QQQ is one of the most popular Exchange Traded Funds and the second most-heavily traded ETF.

Since the NASDAQ 100 is composed of the 100 world’s largest companies, QQQ offers stock investors the chance to gain exposure to large-cap technology companies.

Here is an interesting fact about investing in QQQ :

See the growth of your $10,000 invested in QQQ in the chart below:

Obviously, with the 2020 market turmoil caused by the coronavirus pandemic, QQQ is under-performing. However, the current market conditions can also create a good opportunity to buy QQQ.

What are the advantages of QQQ options trading?

Why trade QQQ ETF Options?

To begin with, QQQ is one of the most traded ETFs . High trading volumes result in high liquidity and many opportunities for positive gains.

Before you start using the QQQ options trading system make sure you take into consideration all these benefits.

Moving forward, we’re going to show you how to use the QQQ options trading system and how to hedge your risk with the QQQ ETF.

How to use the QQQ Options Trading System

Let’s consider the following QQQ trade example:

QQQ options Chain

The options chain is the interface that you will use to place the options trade. You will also use this interface to identify which specific options you want to use.

This gives you an idea of how the average trader’s income can increase by trading QQQ options and earn 100s more than by directly invest in the stock market. The options leverage is definitely a game-changer.

QQQ Swing Trading System

We’re going to lay down a step-by-step action plan on how to trade using the QQQ swing trading system. As we have discussed before, there are many known benefits of using a mid-term swing trading strategy . This swing trading strategy has the potential to give you the steady profits that you need.

Note* we’re using the FREE stock charts from Tradingview.com.

When the MACD and ADX show divergence a reversal in the QQQ price will follow in at least 85 percent of the cases.

Because of the subtle nature of the ADX and MACD divergences, it’s crucial that you confirm your entries with key technical swing levels.

To better visualize the QQQ trading signals, we’re going to teach you an unorthodox trick. Instead of using only one instance of the ADX indicator, we’re going to use two instances of the ADX indicator at the top and at the bottom with the MACD indicator in the middle.

It’s a kind of lagging trading signal because you will only be able to see the divergence after the movement has already occurred.

This is the perfect signal to buy QQQ puts.

So, here are the rules to follow for buying QQQ puts:

See the QQQ chart below:

Note * These QQQ trading signals happen over and over again on all time frames.

QQQ Trading Tips:

1.risk management is critical when trading the qqq., 2. using qqq weekly options can help with risk..

Weekly Options Expire each week, which means you need to be in and out of the trade fast before it expires. If you understand this you can control risk better because you only are looking for a quick move than your out of the trade. Additionally if you use weekly charts that have help you get a bigger picture of the overall market, which can help your trading win percentage:

Final Words – QQQ Options Trading Strategy

Make sure you test this strategy on a demo trading account but make sure you follow the options trading rule outlined throughout this guide.

Feel free to leave any comments below, we do read them all and will respond.

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Related posts, the best price action trading strategy pdf: an essential guide, what is a stablecoin: a complete guide to the future of money, stochastic trading strategy: best settings for trading any chart time-frame.

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Trading Options: Understanding Assignment

The options market can seem to have a language of its own. To the average investor, there are likely a number of unfamiliar terms, but for an individual with a short options position—someone who has sold call or put options—there is perhaps no term more important than " assignment "—the fulfilling of the requirements of an options contract.

Options trading carries risk and requires specific approval from an investor's brokerage firm. For information about the inherent risks and characteristics of the options market, refer to the Characteristics and Risks of Standardized Options also known as the Options Disclosure Document (ODD).

When someone buys options to open a new position ("Buy to Open"), they are buying a right —either the right to buy the underlying security at a specified price (the strike price) in the case of a call option, or the right to sell the underlying security in the case of a put option.

On the flip side, when an individual sells, or writes, an option to open a new position ("Sell to Open"), they are accepting an obligation —either an obligation to sell the underlying security at the strike price in the case of a call option or the obligation to buy that security in the case of a put option. When an individual sells options to open a new position, they are said to be "short" those options. The seller does this in exchange for receiving the option's premium from the buyer.

Learn more about  options from FINRA or access free courses like Options 101 at OCC Learning .

American-style options allow the buyer of a contract to exercise at any time during the life of the contract, whereas European-style options can be exercised only during a specified period just prior to expiration. For an investor selling American-style options, one of the risks is that the investor may be called upon at any time during the contract's term to fulfill its obligations. That is, as long as a short options position remains open, the seller may be subject to "assignment" on any day equity markets are open. 

What is assignment?

An option assignment represents the seller's obligation to fulfill the terms of the contract by either selling or buying the underlying security at the exercise price. This obligation is triggered when the buyer of an option contract exercises their right to buy or sell the underlying security.

To ensure fairness in the distribution of American-style and European-style option assignments, the Options Clearing Corporation (OCC), which is the options industry clearing house, has an established process to randomly assign exercise notices to firms with an account that has a short option position. Once a firm receives an assignment, it then assigns this notice to one of its customers who has a short option contract of the same series. This short option contract is selected from a pool of such customers, either at random or by some other procedure specific to the brokerage firm. 

How does an investor know if an option position will be assigned?

While an option seller will always have some level of uncertainty, being assigned may be a somewhat predictable event. Only about 7% of options positions are typically exercised, but that does not imply that investors can expect to be assigned on only 7% of their short positions. Investors may have some, all or none of their short positions assigned.

And while the majority of American-style options exercises (and assignments) happen on or near the contract's expiration, a long options holder can exercise their right at any time, even if the underlying security is halted for trading. Someone may exercise their options early based upon a significant price movement in the underlying security or if shares become difficult to borrow as the result of a pending corporate action such as a buyout or takeover. 

Note: European-style options can only be exercised during a specified period just prior to expiration. In U.S. markets, the majority of options on commodity and index futures are European-style, while options on stocks and exchange-traded funds (ETF) are American-style. So, while SPDR S&P 500, or SPY options, which are options tied to an ETF that tracks the S&P 500, are American-style options, S&P 500 Index options, or SPX options, which are tied to S&P 500 futures contracts, are European-style options.

What happens after an option is assigned?

An investor who is assigned on a short option position is required to meet the terms of the written option contract upon receiving notification of the assignment. In the case of a short equity call, the seller of the option must deliver stock at the strike price and in return receives cash. An investor who doesn't already own the shares will need to acquire and deliver shares in return for cash in the amount of the strike price, multiplied by 100, since each contract represents 100 shares. In the case of a short equity put, the seller of the option is required to purchase the stock at the strike price.

How might an investor's account balance fluctuate after opening a short options position?

It is normal to see an account balance fluctuate after opening a short option position. Investors who have questions or concerns or who do not understand reported trade balances and assets valuations should contact their brokerage firm immediately for an explanation. Please keep in mind that short option positions can incur substantial risk in certain situations.

For example, say XYZ stock is trading at $40 and an investor sells 10 contracts for XYZ July 50 calls at $1.00, collecting a premium of $1,000, since each contract represents 100 shares ($1.00 premium x 10 contracts x 100 shares). Consider what happens if XYZ stock increases to $60, the call is exercised by the option holder and the investor is assigned. Should the investor not own the stock, they must now acquire and deliver 1,000 shares of XYZ at a price of $50 per share. Given the current stock price of $60, the investor's short stock position would result in an unrealized loss of $9,000 (a $10,000 loss from delivering shares $10 below current stock price minus the $1,000 premium collected earlier).

Note: Even if the investor's short call position had not been assigned, the investor's account balance in this example would still be negatively affected—at least until the options expire if they are not exercised. The investor's account position would be updated to reflect the investor's unrealized loss—what they could lose if an option is exercised (and they are assigned) at the current market price. This update does not represent an actual loss (or gain) until the option is actually exercised and the investor is assigned. 

What happens if an investor opened a multi-leg strategy, but one leg is assigned?

American-style option holders have the right to exercise their options position prior to expiration regardless of whether the options are in-, at- or out-of-the-money. Investors can be assigned if any market participant holding calls or puts of the same series submits an exercise notice to their brokerage firm. When one leg is assigned, subsequent action may be required, which could include closing or adjusting the remaining position to avoid potential capital or margin implications resulting from the assignment. These actions may not be attractive and may result in a loss or a less-than-ideal gain.

If an investor's short option is assigned, the investor will be required to perform in accordance with their obligation to purchase or deliver the underlying security, regardless of the overall risk of their position when taking into account other options that may be owned as part of the overall multi-leg strategy. If the investor owns an option that serves to limit the risk of the overall spread position, it is up to the investor to exercise that option or to take other action to limit risk. 

Below are a couple of examples that underscore how important it is for every investor to understand the risks associated with potential assignment during market hours and potentially adverse price movements in afterhours trading.

Example #1: An investor is short March 50 XYZ puts and long March 55 XYZ puts. At the close of business on March expiration, XYZ is priced at $56 per share, and both puts are out of the money, which means they have no intrinsic value. However, due to an unexpected news announcement shortly after the closing bell, the price of XYZ drops to $40 in after-hours trading. This could result in an assignment of the short March 50 puts, requiring the investor to purchase shares of XYZ at $50 per share. The investor would have needed to exercise the long March 55 puts in order to realize the gain on the initial multi-leg position. If the investor did not exercise the March 55 puts, those puts may expire and the investor may be exposed to the loss on the XYZ purchase at $50, a $10 per share loss with XYZ now trading at $40 per share, without receiving the benefit of selling XYZ at $55.

Example #2: An investor is short March 50 XYZ puts and long April 50 XYZ puts. At the close of business on March expiration, XYZ is priced at $45 per share, and the investor is assigned XYZ stock at $50. The investor will now own shares of XYZ at $50, along with the April 50 XYZ puts, which may be exercised at the investor's discretion. If the investor chooses not to exercise the April 50 puts, they will be required to pay for the shares that were assigned to them on the short March 50 XYZ puts until the April 50 puts are exercised or shares are otherwise disposed of.

Note: In either example, the short put position may be assigned prior to expiration at the discretion of the option holder. Investors can check with their brokerage firm regarding their option exercise procedures and cut-off times.

For options-specific questions, you may contact OCC's Investor Education team at [email protected] , via chat on OptionsEducation.org or subscribe to the OIC newsletter . If you have questions about options trading in your brokerage account, we encourage you to contact your brokerage firm. If after doing so you have not resolved the issue or have additional concerns, you can contact FINRA .

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Options Assignment

How can i tell when i will be assigned.

You can never tell when you will be assigned. Once you sell an American-style option (put or call), you have the potential for assignment to fulfill your obligation to receive (and pay for) or deliver (and are paid for) shares of stock on any business day. In some circumstances, you may be assigned on a short option position while the underlying shares are halted for trading, or perhaps while they are the subjects of a buyout or takeover.

To ensure fairness in the distribution of equity and index option assignments, OCC utilizes a random procedure to assign exercise notices to clearing member accounts maintained with OCC. The assigned firm must then use an exchange-approved method (usually a random process or the first-in, first-out method) to allocate notices to its accounts that are short the options.

Some generalizations might help you understand likelihood of assignment on a short-option position:

• Option holders only exercise about 7% of options. The percentage hasn't varied much over the years. That does not mean that you can only be assigned on 7% of your short option. It means that, in general, option exercises are not that common.
• The majority of option exercises (and the corresponding assignments) occurs as the option gets closer to expiration. It usually doesn't make sense to exercise an option, which has any time premium over intrinsic value. For most options, that doesn't occur until close to expiration.
• In general terms, an investor is more likely to exercise a put that goes in-the-money than a call that goes in-the-money. Why? Think about the result of an exercise. An investor who exercises a put uses it to sell shares and receive cash. A person exercising a call option uses it to buy shares and must pay cash. Option holders are more likely to exercise options if it means they can receive cash sooner. The opposite is true for calls, where exercise means you have to pay cash sooner.

The bottom line is that you really don't have any sure-fire way to predict when you will be assigned on a short option position. It can happen any day the stock market is open for trading.

Could I be assigned if my covered calls are in-the-money?

If i am short a call option (on a covered write) and i buy back my short call, is it possible for..., if i am short a call option (on a covered write) and i buy back my short call, is it possible for me to be assigned (and the stock position to be called away) that night, i sold short 10 options contracts recently. unfortunately, i was assigned early on each contract..., i sold short 10 options contracts recently. unfortunately, i was assigned early on each contract, one at a time. couldn't all the contracts have been assigned at once, are options automatically assigned when they are in-the-money at expiration is there a way that..., are options automatically assigned when they are in-the-money at expiration is there a way that i can avoid assignment.

OCC encourages all investors to inform their brokerage firm of their exercise intentions for their long options at expiration. While each firm may have their own thresholds, OCC employs an administrative procedure where options that are $.01 in-the-money are exercised unless contrary instructions are provided. Customers and brokers should check with their firm's operations department to determine their company's policies regarding exercise thresholds.

An option holder has the right to exercise their option regardless of the price of the underlying security. It is a good practice for all option holders to express their exercise (or non-exercise) instructions to their broker. Is there a magic number that ensures that option writers will not be assigned? No. Although unlikely, an investor may choose to exercise a slightly out-of-the-money option or choose not to exercise an option that is in-the-money by greater than $.01.

Some investors use the saying, "when in doubt, close them out.” This means that if they buy back any short contracts, they are no longer at risk of assignment.

I wrote a slightly out-of-the-money covered call. The call has since moved in-the-money. Is there...

I wrote a slightly out-of-the-money covered call. the call has since moved in-the-money. is there any way to avoid assignment on that short call, if i buy-to-close a short option position, how can i be sure i will not be assigned.

You will want to first check with your broker to ensure that an assignment has not already occurred.

Because OCC processes closing buy transactions before exercises, there is no possibility of being assigned on positions that were closed during that day's trading hours.

When I sell an option to open, is my only chance of assignment (and being required to fulfill my...

When i sell an option to open, is my only chance of assignment (and being required to fulfill my obligations as the option writer) when the person or entity that bought from me decides to exercise.

No. There are several reasons why this is untrue. First, the buy side of your opening sale could have been a closing purchase by someone who was already short the option. Second, OCC allocates assignments randomly. Anyone short that particular option is at risk of assignment when an option holder decides to exercise. Third, assuming the other side of your trade was an opening purchase, they may sell to close at any time but since you are still short, you are at risk of assignment.

As long as you keep a short option position open, you are at risk of assignment. Assignment risk increases as the option becomes deeper in-the-money and as expiration approaches (the option trades with less time premium). Assignment risk also increases just before the ex-dividend date for short calls and just after the ex-dividend date for short puts.

At expiration, OCC exercises all equity options that are in-the-money by $.01 or more unless the option holder instructs their broker not to exercise or the stock has been removed from OCC’s exercise-by-exception processing.

The exchanges recently halted trading on a stock where I’m short puts. Am I still obligated to...

The exchanges recently halted trading on a stock where i’m short puts. am i still obligated to purchase the security if assigned.

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The Risks of Options Assignment

Any trader holding a short option position should understand the risks of early assignment. An early assignment occurs when a trader is forced to buy or sell stock when the short option is exercised by the long option holder. Understanding how assignment works can help a trader take steps to reduce their potential losses.

Understanding the basics of assignment

An option gives the owner the right but not the obligation to buy or sell stock at a set price. An assignment forces the short options seller to take action. Here are the main actions that can result from an assignment notice:

• Short call assignment: The option seller must sell shares of the underlying stock at the strike price.
• Short put assignment: The option seller must buy shares of the underlying stock at the strike price.

For traders with long options positions, it's possible to choose to exercise the option, buying or selling according to the contract before it expires. With a long call exercise, shares of the underlying stock are bought at the strike price while a long put exercise results in selling shares of the underlying stock at the strike price.

When a trader might get assigned

There are two components to the price of an option: intrinsic 1 and extrinsic 2  value. In the case of exercising an in-the-money 3 (ITM) long call, a trader would buy the stock at the strike price, which is lower than its prevailing price. In the case of a long put that isn't being used as a hedge for a long stock position, the trader shorts the stock for a price higher than its prevailing price. A trader only captures an ITM option's intrinsic value if they sell the stock (after exercising a long call) or buy the stock (after exercising a long put) immediately upon exercise.

Without taking these actions, a trader takes on the risks associated with holding a long or short stock position. The question of whether a short option might be assigned depends on if there's a perceived benefit to a trader exercising a long option that another trader has short. One way to attempt to gauge if an option could be potentially assigned is to consider the associated dividend. An options seller might be more likely to get assigned on a short call for an upcoming ex-dividend if its time value is less than the dividend. It's more likely to get assigned holding a short put if the time value has mostly decayed or if the put is deep ITM and close to expiration with a wide bid/ask spread on the stock.

It's possible to view this information on the Trade page of the thinkorswim ® trading platform. Review past dividends, the price of the short call, and the price of the put at the call's strike price. While past performance cannot be relied upon to continue, this information can help a trader determine whether assignment is more or less likely.

Reducing the risk associated with assignment

If a trader has a covered call that's ITM and it's assigned, the trader will deliver the long stock out of their account to cover the assignment.

A trader with a call vertical spread 4 where both options are ITM and the ex-dividend date is approaching may want to exercise the long option component before the ex-dividend date to have long stock to deliver against the potential assignment of the short call. The trader could also close the ITM call vertical spread before the ex-dividend date. It might be cheaper to pay the fees to close the trade.

Another scenario is a call vertical spread where the ITM option is short and the out-of-the-money (OTM) option is long. In this case, the trader may consider closing the position or rolling it to a further expiration before the ex-dividend date. This move can possibly help the trader avoid having short stock on the ex-dividend date and being liable for the dividend.

Depending on the situation, a trader long an ITM call might decide it's better to close the trade ahead of the ex-dividend date. On the ex-dividend date, the price of the stock drops by the amount of the dividend. The drop in the stock price offsets what a trader would've earned on the dividend and there would still be fees on top of the price of the put.

Assess the risk

When an option is converted to stock through exercise or assignment, the position's risk profile changes. This change could increase the margin requirements, or subject a trader to a margin call, 5 or both. This can happen at or before expiration during early assignment. The exercise of a long option position can be more likely to trigger a margin call since naked short option trades typically carry substantial margin requirements.

Even with early exercise, a trader can still be assigned on a short option any time prior to the option's expiration.

1  The intrinsic value of an options contract is determined based on whether it's in the money if it were to be exercised immediately. It is a measure of the strike price as compared to the underlying security's market price. For a call option, the strike price should be lower than the underlying's market price to have intrinsic value. For a put option the strike price should be higher than underlying's market price to have intrinsic value.

2  The extrinsic value of an options contract is determined by factors other than the price of the underlying security, such as the dividend rate of the underlying, time remaining on the contract, and the volatility of the underlying. Sometimes it's referred to as the time value or premium value.

3  Describes an option with intrinsic value (not just time value). A call option is in the money (ITM) if the underlying asset's price is above the strike price. A put option is ITM if the underlying asset's price is below the strike price. For calls, it's any strike lower than the price of the underlying asset. For puts, it's any strike that's higher.

4  The simultaneous purchase of one call option and sale of another call option at a different strike price, in the same underlying, in the same expiration month.

5  A margin call is issued when the account value drops below the maintenance requirements on a security or securities due to a drop in the market value of a security or when buying power is exceeded. Margin calls may be met by depositing funds, selling stock, or depositing securities. A broker may forcibly liquidate all or part of the account without prior notice, regardless of intent to satisfy a margin call, in the interests of both parties.

Just getting started with options?

More from charles schwab.

Today's Options Market Update

Weekly Trader's Outlook

What to Know About Zero-Days-to-Expiration Options

Related topics.

Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Please read the options disclosure document titled  Characteristics and Risks of Standardized Options before considering any options transaction. Supporting documentation for any claims or statistical information is available upon request.

With long options, investors may lose 100% of funds invested.

Spread trading must be done in a margin account.

Multiple leg options strategies will involve multiple commissions.

Commissions, taxes and transaction costs are not included in this discussion, but can affect final outcome and should be considered. Please contact a tax advisor for the tax implications involved in these strategies.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

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MODULE 9 – HOW TO DEAL WITH EARLY ASSIGNMENT

First it is important to note that early Assignment is only an issue for American style options.

If you are trading Iron Condors on the indexes (RUT, SPX, NDX and MNX), you do not even need to worry about early assignment.

These are European Options and are cash settled. Contrastingly for ETF’s (IWM, SPY and QQQ) and single stock options there is a risk of early assignment.

Despite this in this module we will explain the risk of early assignment is almost inconsequential.

In fact, assignment when it happens can be an exceptionally good thing.

The reason why American options are almost never exercised before expiration is to do with the characteristics of an option itself.

An option has two sources of value, intrinsic and extrinsic value. Intrinsic value is the value of the option if it is exercised today, extrinsic value is the time value of the option.

The important thing about an option is that the extrinsic or time value must be equal or greater than 0.

Thus, exercising options voluntarily removes the extrinsic value for the buyer.

There are few reasons options are exercised before expiration because of this.

Generally, options could potentially be exercised early when they are deep ITM and have almost no extrinsic value left.

This can sometimes happen with dividends if an investor would prefer to exercise and receive the dividend as opposed to continue to hold the call on a deep ITM option.

Another reason might be if a large institution had an exceptionally large position, it might be cheaper to exercise early than to sell the position in the options market and pay the bid / ask spread on a less liquid underlying.

A deep ITM option can sometimes also be exercised if the borrowing rate becomes attractive.

All these are rare and even more rare is an option exercised with a lot of extrinsic value left. If this happens you won the lottery.

Despite this, depending how margin is calculated at your brokerage you may be left with a margin call.

In this case simply sell or buy back the assigned shares and sell back the other leg of the option.

The other main assignment risk, which happens more often occurs on expiration day.

This occurs when a options short leg is exactly At The Money. In this case it can become unclear whether assignment will occur.

As American Options trade after hours on Friday this can sometimes lead to some surprise assignments come Monday morning.

In this case the best way to avoid the risk of assignment is to simply close out the position on the day of expiry.

Traders that want to learn more about options assignment and exercise, should read this article.

In the 10th and final Module in the iron condor course, we will be looking at whether we should trade iron condors on indexes or ETF’s.

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QQQ Option Trading : 24 Things You Should Learn About Nasdaq-100 Stock Options

Last Updated on 10 February, 2024 by Trading System

Are there options on QQQ?

Yes, there are options available on the QQQ, or the Nasdaq-100 Index Tracking Stock. The QQQ options are American-style options that are listed on the NASDAQ Options Market. These options are available for trading during regular market hours, as well as extended-hours trading.

What are QQQ options?

QQQ options are derivatives of the Nasdaq-100 Index Tracking Stock, which is an exchange-traded fund (ETF) that tracks the performance of the Nasdaq-100 Index. The Nasdaq-100 Index consists of the 100 largest non-financial companies listed on the Nasdaq stock exchange. QQQ options allow traders to gain exposure to the performance of the Nasdaq-100 Index without actually having to purchase the ETF.

What is QQQ?

QQQ, or the Nasdaq-100 Index Tracking Stock, is an exchange-traded fund (ETF) that tracks the performance of the Nasdaq-100 Index. The Nasdaq-100 Index consists of the 100 largest non-financial companies listed on the Nasdaq stock exchange. QQQ options are derivatives of the ETF, allowing traders to gain exposure to the performance of the Nasdaq-100 Index without actually having to purchase the ETF.

How do you master QQQ options?

Mastering QQQ options requires a good understanding of the underlying asset and its movements. Traders need to understand the fundamentals behind the index, as well as its technicals. Traders should also work on developing a solid trading plan, and understand the different strategies available to them. Additionally, traders should practice with a demo account before putting any real money on the line.

Can you trade QQQ options 24 hours?

No, QQQ options are only available for trading during regular market hours, as well as during extended-hours trading. The regular market hours for trading QQQ options are from 9:30 am to 4:00 pm, Eastern Time. Extended-hours trading is available from 8:00 am to 9:30 am, and from 4:00 pm to 8:00 pm, Eastern Time.

Are options traders successful?

The success of traders depends largely on their ability to use the right strategies and manage risk. Those who are able to properly analyze the markets and make sound decisions are more likely to be successful than those who do not. Additionally, traders should also have a solid understanding of the fundamentals driving the markets and the technical patterns associated with them.

Can you become a millionaire trading option?

Becoming a millionaire through trading options is possible, but it is not likely. Trading options can be a very profitable endeavor, but it is important to remember that there are risks involved. Those who are able to properly manage their risk and use the right strategies are more likely to be successful, but it is still possible to lose money even with the best strategies.

Can you swing trade QQQ options?

Yes, it is possible to swing trade QQQ options. Swing trading involves taking advantage of short-term price movements in order to generate profits. Traders who are able to properly analyze the markets and identify opportunities for swing trading can potentially make a profit from trading QQQ options.

QQQ Options Technical Analysis

Technical analysis is a key component of trading QQQ options. Traders should be able to identify and interpret patterns in the price action of the underlying asset, as well as use indicators to make predictions about future price movements. Technical analysis can be used to make trading decisions, as well as to set entry and exit points.

QQQ Options Basics

Before trading QQQ options, it is important to understand the basics of options trading. This includes understanding the different types of options, the option pricing structure, and the strategies used to trade options. Additionally, it is important to understand the risks involved with trading options, as well as the potential rewards.

How to day trade QQQ options

Day trading QQQ options requires a good understanding of the markets and the different strategies available for trading. Traders should be able to identify and interpret patterns in the price action of the underlying asset, as well as use indicators to make predictions about future price movements. Additionally, traders should have a solid understanding of the fundamentals driving the markets and the different strategies they can use to take advantage of short-term price movements.

Can you scalp QQQ options?

Yes, it is possible to scalp QQQ options. Scalping involves taking advantage of small price movements in the markets in order to generate profits. Traders who are able to identify and interpret patterns in the price action of the underlying asset, as well as use indicators to make predictions about future price movements, are more likely to be successful when scalping QQQ options.

Why are QQQ options so popular?

QQQ options are popular because they offer traders exposure to the performance of the Nasdaq-100 Index without actually having to purchase the ETF. Additionally, options offer traders the ability to leverage their capital, as well as the flexibility to take advantage of both bullish and bearish market conditions. Options are also popular because of the different strategies that can be used to take advantage of short-term price movements.

QQQ Options Trading Strategy

Traders should have a solid trading strategy in place before trading QQQ options. This should include understanding the different strategies available, as well as the risks and rewards associated with each. Additionally, traders should be able to identify and interpret patterns in the price action of the underlying asset, as well as use indicators to make predictions about future price movements.

How do QQQ options work?

How do I buy options for the QQQ?

Options for the QQQ can be purchased through an online broker. Traders will need to select the appropriate option contract, as well as the number of contracts they wish to purchase. Additionally, traders should also be aware of any additional fees or commissions associated with the purchase of the option.

The PROs & CONs of trading the QQQ Option

Pros: • Options offer traders the ability to leverage their capital. • Options offer traders the flexibility to take advantage of both bullish and bearish market conditions. • Options allow traders to gain exposure to the performance of the Nasdaq-100 Index without actually having to purchase the ETF.

Cons: • Options involve a high degree of risk and can result in significant losses. • Options trading requires a good understanding of the markets and the different strategies available. • Options are subject to time decay and can expire worthless if not managed properly.

How are QQQ options taxed?

The taxation of QQQ options depends on the type of option and the holding period. Generally, gains from options held for less than one year are taxed as ordinary income, while gains from options held for longer than one year are taxed as long-term capital gains. Additionally, traders should also be aware of any applicable taxes in their particular jurisdiction.

What time do QQQ options start trading?

QQQ options start trading at 9:30 am Eastern Time. This is the regular market open for the Nasdaq Options Market.

When did QQQ options start trading?

QQQ options started trading on March 6th, 2003. This was the first day that the Nasdaq Options Market opened for trading.

Do QQQ options trade 24 hours?

How do QQQ options expire?

QQQ options expire on the Saturday following the third Friday of the month. For example, if the third Friday of the month is June 19th, then the QQQ options will expire on June 20th.

What time do QQQ options expire?

QQQ options expire at the close of business on the Saturday following the third Friday of the month. For example, if the third Friday of the month is June 19th, then the QQQ options will expire at 4:00 pm Eastern Time on June 20th.

What are the QQQ options trading hours?

The regular market hours for trading QQQ options are from 9:30 am to 4:00 pm, Eastern Time. Extended-hours trading is available from 8:00 am to 9:30 am, and from 4:00 pm to 8:00 pm, Eastern Time.

Final thoughts on options trading in QQQ

Options trading in the QQQ is an attractive option for traders looking to gain exposure to the performance of the Nasdaq-100 Index without actually having to purchase the ETF. However, it is important to remember that options involve a high degree of risk and can result in significant losses. Those who are able to properly analyze the markets and make sound decisions are more likely to be successful than those who do not. Additionally, traders should also have a solid understanding of the fundamentals driving the markets and the different strategies they can use to take advantage of short-term price movements.

How do you trade QQQ options 24 hours?

No, QQQ options are only available during regular market hours (9:30 am to 4:00 pm Eastern Time) and extended-hours trading (8:00 am to 9:30 am and 4:00 pm to 8:00 pm Eastern Time).

QQQ options are derivatives of the Nasdaq-100 Index Tracking Stock, enabling traders to gain exposure to the index’s performance without purchasing the ETF. Understanding options basics, strategies, and technical analysis is crucial.

The taxation of QQQ options depends on the type and holding period. Generally, gains from options held for less than one year are taxed as ordinary income, while gains from options held for longer than one year are taxed as long-term capital gains.

QQQ options expire on the Saturday following the third Friday of the month, with the specific date determined by the monthly calendar.

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When exactly (time) is the 'automatic exercising' of an option triggered?

I understand that - for many brokers - an option that runs out is automatically exercised when it is 'in the money' on the end of its last day.

My question is at what exact time is the decision made? (based on which closing price?)

Current example: today, 2020-09-11, I have shorted puts for LUV with a strike of 39 that end today. At market close, which is 16:00 (4pm), they are in the money (LUV closed at 38.95). In after-hours trading, LUV went back over the strike price (and that might change again, as the day is not yet over, ignore that). Let's assume it closes at 20:00 (8 pm) at 39.05.

There are very different outcomes depending on the time when the exercising decision is made:

• at 16:00 - that means the option is automatically exercised, and someone out there sells me a truck full of LUV for 39.00. I turn around and sell them on the market for maybe 39.05. He probably is not happy with that (assuming he didn't react in time and stop the execution)
• at 20:00 - that means the option decays worthless.

The question is - do brokers use the 16:00 market close price, or the 20:00 after-market close price for the exercising decision? - and, when will the exercised LUV shares appear in my account, so I can sell them?

• option-exercise

• The details in the option contract will tell you t h e exact time –  mmmmmm Commented Sep 11, 2020 at 21:27
• What details? There is no further paperwork when you buy options on the market. And anyway, it depends on the broker if they get executed or not, not on the option. My broker doesn't have any details on the website; neither have other brokers. –  Aganju Commented Sep 11, 2020 at 21:31
• @mmmmmm - An option contract does not include details involving the exact time details. Expiration rules are set by the OCC and handled by them. –  Bob Baerker Commented Sep 11, 2020 at 23:49

2 Answers 2

Just to clarify, options are automatically exercised if they expire a penny or more in-the-money.

This is a policy or rule set by the Options Clearing Corporation (that clears all US exchange listed options).

The price used is the official closing price of the security, which is the closing price published by the primary exchange (the one responsible for maintaining the listing of the stock) at the 4PM close (note: some indices close at 4:15 PM).

The policy does not prevent the holder of the option submitting an exercise instruction anyway (i.e. I still want to buy the stock at the (call) option strike price, regardless of whether the option expired in the money), nor submitting a contrary exercise instruction (I.e. I do not want to buy the stock at the (call) option strike price, even if it expired in the money).

Brokers have until around 5:30 Eastern (4:30 Central) to submit exercise or contrary exercise instructions to the OCC (it depends on the rules of the relevant options exchange). In turn the deadline for the brokers' customers may be earlier and will vary from broker to broker.

OCC page on Options Exercise

If for example your broker allowed you to submit an exercise instruction until 4:30 PM, and the price was out of the money at the close, but in the money after the close, you could submit an exercise instruction at 4:29 (assuming you get it in by the 4:30 deadline), as it would not be automatically exercised as the option was not in the money based on the closing price.

• (confirmed. It was exercised according to the 16:00 / 4 pm EST closing price, giving me a nice gain when selling the shares in the after-hours market) –  Aganju Commented Sep 17, 2020 at 1:59
• 1 I just wish there was a way to automatically exercise me... –  Aganju Commented Sep 17, 2020 at 2:47

Brokers have in house rules for who gets assigned prior to expiration but they are not involved in the auto exercise decision for ITM options at expiration.

In the US, if an option is one cent or more in-the-money (ITM) at expiration, the Option Clearing Corp (OCC) will automatically exercise options whether they are long or short. This is called Exercise by Exception.

If you are long the option, you can designate to the OCC via your broker that it is not auto exercised at expiration. This would make sense if it is ITM by pennies and your commission and/or fees to close the position exceeds the ITM amount. Short sellers have no such ability.

There's a lot of contradictory information out there about when expiration is.

Per Investopedia :

Typically, the last day to trade an option is the third Friday of the expiration month, but the actual expiration time is not until the next day (Saturday).

The NASDAQ offers a more detailed definition: "The expiration time is the time of day by which all exercise notices must be received on the expiration date. Technically, the expiration time is currently 11:59 am Eastern time on the expiration date, but public holders of option contracts must indicate their desire to exercise no later than 5:30 pm on the business day which precedes the expiration date."

A public holder of an option usually must declare their notice to exercise by 5:00 p.m. (or 5:30 p.m. according to NASDAQ) on Friday.

The above is for equity assumptions and assumes that the market is open on Friday. Also note that the expiration time may be 5 PM or 5:30 PM. Even Investopedia doesn't provide a clear answer. To add insult to injury, some web sites state that this is for standard monthly options but don't spell it out for weekly options.

What I can tell you is that it is good practice to buy to close all options that are at-the-money at expiration (or designate non exercise to OCC for long options) if you don't want a possible position in the underlying. The OCC handles the exercises and assignments over the weekend and you can wake up Monday morning with a long or short position in the underlying with unexpected and significantly large directional risk.

This problem is called Pin Risk . You can read about it here.

• What I read from that is that the execution decision cannot be based on the 20:00 / 8 pm after-hours closing price, because it's made earlier. We'll see what happens, I'll update here. - Regarding 'buy-to-close': LUV was trading at 39.23 about 70 seconds before 4 pm. I though I'm confortably away from the strike, and didn't want to pay a chunk to close the option... I understood the risk, it's not a problem. I just wanted to know which time the decision is based on. I already shorted LUV at 39.05 now, so if I get them assigned at 39.00, I'm happy. –  Aganju Commented Sep 12, 2020 at 0:22
• The 8 PM closing price refers to the end of trading in the underlying. It has nothing to do with the process of assignment and expiration other than determining the binary result of ITM or OTM. Note that if the underlying was ITM before 4 PM, an option may have already been exercised by the owner, regardless of where it closes. If LUV was OTM during the day, I would have had an open order to BTC for one cent. If a large position, you can accelerate the penny bid a few cents near the close. At $39.23 and OTM minutes before end the of trading, the put should not have cost a chunk to close. –  Bob Baerker Commented Sep 12, 2020 at 0:47
• Call me risk averse but I would not have shorted the shares to cover the "possible" assignment. Sometimes, funky things happen with pin risk at expiration. If so, you end up with what you didn't want in the first place. Instead of being directionally long the shares Monday AM, now you're directionally short. Pay the piper and buy-to-close. –  Bob Baerker Commented Sep 12, 2020 at 0:48
• One more thought. If you want the precise details of expiration, call the OCC or the CBOE next week. –  Bob Baerker Commented Sep 12, 2020 at 2:09

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What Is the Invesco QQQ ETF?

How invesco qqq etf works, qqq etf sectors, qqq etf top holdings, qqq dividend history, qqq pros and cons, qqq performance, the bottom line, qqq etf risks and rewards.

The Invesco QQQ ETF is an exchange-traded fund (ETF) that tracks the Nasdaq 100 Index. Because it passively follows the index, the QQQ share price goes up and down along with the tech-heavy Nasdaq 100.

Passive management keeps fees low, and investors are rewarded with the full gains of the volatile index if it rises. But they must also bear the Nasdaq 100's full losses when it falls. In this article, we explain how the QQQ ETF works and then consider the risks and rewards associated with trading the QQQ.

Key Takeaways

• The Invesco QQQ ETF is a popular exchange-traded fund that tracks the Nasdaq 100 Index.
• QQQ holdings are dominated by big technology-related companies such as Apple, Amazon, Google, and Meta.
• The QQQ ETF offers investors big rewards during bull markets, with the potential for long-term growth, ready liquidity, and low fees.
• QQQ usually declines more in bear markets, has high sector risk, often appears overvalued, and holds no small-cap stocks.
• This ETF allows traders to invest in the largest 100 non-financial companies listed on the Nasdaq.

QQQ has 101 holdings and is the seventh-most popular ETF in the world by three-month average daily share volume. The index excludes financial companies and is based on market capitalization. Like the Nasdaq 100, QQQ holdings are heavily weighted toward large-cap technology companies. Assets under management (AUM) at QQQ were $288.23 billion as of June 22, 2024.

The Invesco QQQ ETF was previously known as the PowerShares QQQ Trust ETF. It is also informally called the triple-Qs or the cubes. The QQQ ETF is often viewed as a snapshot of how the technology sector is trading.

The Nasdaq 100 Index that the QQQ share price follows is based on a modified capitalization methodology. This modified method uses individual weights of included items according to their market capitalization. Weighting allows constraints to limit the influence of the largest companies and balance the index with all of its members. To accomplish this, Nasdaq reviews the composition of the index each quarter and adjusts weightings if the distribution requirements are not met.

The Invesco QQQ ETF offers traders a way to invest in the 100 largest non-financial companies listed on the Nasdaq.

The Invesco QQQ ETF tracks many high-tech sectors, including information technology (IT), communications services, and healthcare. The QQQ is rebalanced quarterly and reconstituted annually to track the Nasdaq 100 index.

It is important to remember that some of the companies people associate with technology are generally classified in other sectors. For example, Alphabet Inc. ( GOOGL , Google's parent company) and Meta Platforms, Inc. ( META , formerly known as Facebook) are under the communications services sector. Amazon.com, Inc. ( AMZN ) is part of the consumer discretionary sector.

Trading the QQQ ETF is a good way to get the rewards of investing in technology stocks without the risks of betting on individual companies.

The sector breakdown of the Invesco QQQ ETF as of June 22, 2024, appears in the table below.

The top 10 stocks in the Invesco QQQ ETF made up about 51% of all QQQ holdings as of Q2 2024. They are given in the table below.

The top holding of the QQQ ETF holding is Microsoft Corporation ( MSFT ), which had a market cap of more than $3.3 trillion in Q2 2024.

Meanwhile, Nvidia became one of the top-performing tech stocks in 2024. Apple Inc, Alphabet, and Amazon all have strong operating cash flows and are very popular with investors and funds. Most of these top stock holdings consistently deliver on the bottom line and are able to navigate change without harming their investors. While still offering legacy products like operating systems, Microsoft has successfully reinvented itself, transitioning to its cloud-based Azure and artificial intelligence.

Like most assets, the QQQ ETF has specific strengths and weaknesses that investors need to consider before putting it in their portfolios.

• Big bull market rewards : If you're feeling bullish or want a bullish investment for an asset allocation, the QQQ ETF is a good choice. The QQQ price increases more than the S&P 500 during bull markets.
• Long-term growth potential : QQQ holdings include many companies that develop new technologies. That gives the QQQ ETF more potential for long-term growth. QQQ is also much more diversified across the growth technology sector. This means it is safer to diversify capital allocation in the tech sector through investment in QQQ than making individual investments.
• Liquidity : Frequent traders need to buy and sell quickly at a low cost. The QQQ ETF offers them this liquidity. AUM for QQQ reached more than $228 billion in 2024, providing a large market for traders.
• Low expenses : The QQQ ETF's expense ratio was 0.2% as of Q2 2024. Reducing the expense ratio is the only guaranteed way to increase returns from fund investments because expenses can add up over time.
• High bear market risk : Just as QQQ tends to outperform the S&P 500 during bull markets, it also often underperforms it during bear markets. In particular, the QQQ share price declined significantly when the dotcom bubble collapsed.
• Volatility risk : Tech sector stocks are growth stocks and are more volatile than the rest of the market. As a result, the Nasdaq 100 also makes many more significant daily, monthly, and annual moves than other indexes, such as the S&P 500. For example, the fund had annual returns of -0.12% in 2018, 38.96% in 2019, -32.58% in 2022, and 54.85% in 2023.
• Nasdaq-only focus : The fund has a Nasdaq-only focus and excludes successful tech companies listed on other exchanges. For example, Salesforce.com, Inc. (CRM), which is listed on the New York Stock Exchange (NYSE), is not included in the index. Neither are Oracle Corporation (ORCL) nor Block, Inc. (SQ), both of which are listed on the same exchange.
• Sector risk : The root cause of the QQQ ETF's high risks and rewards is that it places more weight on volatile technology-related sectors than the S&P 500. There is also a sector risk that Nasdaq 100 stocks will eventually become less important, much like the railroad companies that once dominated the Dow Jones Transportation Average (DJTA). Investors already talk about old tech stocks vs. mostly newer FAANG stocks within the Nasdaq.
• High valuation levels : QQQ holdings tend to be too expensive by most of the standards value investors use. For example, QQQ had a price-to-earnings ratio of 30.26 on June 22, 2024.
• No small-cap stocks : Because the QQQ ETF holds only 100 of the Nasdaq's largest companies, it necessarily excludes small-cap stocks. Small caps outperformed larger companies in the long run, according to research by Fama and French. Furthermore, growth investing also emphasizes small companies because they have more room to grow.

What Are the Pros and Cons of Trading in QQQ?

Big bull market rewards

Long-term growth potential

Low expenses

High bear market risk

Sector risk

High valuation levels

No small-cap stocks

Volatility risk

Nasdaq-only focus

Being more heavily weighted toward growth stocks and high-tech sectors, the Nasdaq 100 (and, by extension, the QQQ ETF, which tracks the index) has outperformed the broader S&P 500 over the past several years.

As the chart below depicts, over the nearly seven-year period from Q3 2017 through Q2 2024, the QQQ has returned 234.71%, nearly double what SPY (an S&P 500 ETF) has returned.

The average annual return of QQQ was 18.59% during the 10 years ended Q1 2024.

What Companies Make Up the QQQ ETF?

Stock holdings in the QQQ ETF include 100 of the biggest companies in the Nasdaq, which tend to be tech giants such as Apple, Amazon, Google, and Meta. The top 10 stocks in the portfolio make up over half of its total holdings.

Is QQQ Stock Worth Buying?

QQQ is one of the best choices for active traders who are bullish on large technology companies. It is also one of the most popular Nasdaq-tracking ETFs , although several others also exist.

What Stocks Make Up QQQ?

QQQ mirrors the Nasdaq 100, which is a tech heavy index of large cap stocks listed on the Nasdaq. Companies in Microsoft, Apple, Nvidia, Broadcom, and Alphabet.

Is QQQ the Same as Nasdaq?

QQQ is an index fund offered by Invesco that mimics the returns of the Nasdaq 100 index. Nasdaq is a stock exchange that provides a stock trading platform.

The Invesco QQQ ETF checks many of the boxes short-term traders look for in ETFs, and it also has significant advantages for long-term investors. The ETF offers liquid, cost-efficient exposure to a tech-heavy basket of large-cap, innovative companies. Furthermore, investors benefit from increases in the QQQ share price without being burdened by stock-picking issues.

But those advantages are offset by sector concentration and volatility. Stocks contained within the index also have significantly high valuation levels and P/E ratios . This makes them susceptible to steep increases or declines. There are no small-cap stocks in the index to minimize the reliance on large-cap tech stocks.

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QQQ: Bumpy Short-Term Ride Possible (Rating Downgrade)

• QQQ Trust ETF might have seen a nice increase so far in 2024, but the risks have risen in line with rising valuations.
• Among its top 10 constituents, only four are now trading at lower PE multiples than their five-year averages. Of these, there's only a small difference for Alphabet, and Tesla can see further downside.
• Amazon still has positive potential, and with a more prominent communications sector and less significant consumer discretionary, QQQ can still see some upside. But a pullback is increasingly likely.

When I last wrote about the Nasdaq tracker fund Invesco QQQ Trust ETF ( NASDAQ: QQQ ) in March, it was losing its edge to the S&P 500 ( SP500 ) index following a significant lead in 2023. However, it’s back to growing faster (see chart below).

Price Returns, QQQ and SP500 (Source: Seeking Alpha)

This is despite the fact that seven of its top 10 constituents are the same as that for the S&P 500. In fact, the biggest three, Microsoft ( MSFT ), NVIDIA ( NVDA ) and Apple ( AAPL ) have the same ranking among both indices. But what differentiates QQQ significantly, is the higher share for information technology [IT]. Accounting for 52% in its sector allocation, it far exceeds that for the S&P 500 at 34%. With the S&P 500 IT index seeing a robust 28.3% increase YTD , QQQ's edge over the S&P so far this year can be explained.

QQQ may well maintain a relative lead in the foreseeable future as well, considering that the IT sector can be less vulnerable to a macroeconomic slowdown, which is beginning to show up in the US . The S&P 500 is more exposed to cyclical sectors, which are more sensitive to economic fluctuations by comparison.

However, that doesn’t mean there aren't risks ahead for QQQ at all. On the contrary, a look at its biggest constituents shows that downside risks have only risen since the last time I checked. But there is upside too. Here I assess how the balance is likely to play out for the remainder of 2024.

Robust gains cap future upside

The biggest risk to further gains for QQQ comes from the valuations of its top ten constituents. Here’s why:

• While five of them are trading at lower forward non-GAAP price-to-earnings (P/E) ratios compared to their five-year averages [5y avg] in March, the number has dropped to four now. This is on account of NVDA’s big gains YTD, resulting in it now trading at the same level as its 5y avg (see table below).
• Of the four remaining, Alphabet’s shares, both Class A and Class C, now have a far smaller differential with their 5y avg at 1.8 and 1.9 respectively compared with 3.6 in March.
• Next, Tesla might still have a big differential, but it’s unlikely to go back to its 5y avg in the foreseeable future anyway. Electric vehicle [EV] sales are slowing down in the US, one of the biggest EV markets, and at Tesla’s cost . With rising competition among EV manufacturers, there’s downward pressure on profit margins and there’s upward pressure on the company’s costs. The probability of downside to the stock was high enough for me to actually assign a sell rating to it here .

Source: Invesco, Seeking Alpha, Author's Estimates

• Among the five constituents that were already trading at ratios above their 5y avg levels in March, the gap has further expanded for three of them - Apple, Broadcom ( AVGO ) and Costco ( COST ). Microsoft and Meta ( META ) are the only exceptions to this and even the difference for them isn’t significantly improved from what it was a quarter ago. This raises the question of how much more upside there is to these stocks.
• Further, as a result of the improved performance over the past quarter, the weighted forward P/E for the top 10 constituent stocks has now risen to 38x from 33.8x in March.

It’s also worth mentioning that while IT could be more resilient in weaker economic times, the rise YTD has resulted in a higher forward P/E of 28.9x as of May 31 for the S&P 500 IT index, compared to QQQ’s ratio is, as of March 31, at 26x . While the time periods for the P/Es aren’t a perfect comparison, with both the index and the fund having only risen in price since, the trend is likely to have sustained. This indicates that the likelihood of a correction is higher in the sector going forward.

The positives

However, it’s not necessarily all downhill from here, even as the risks have risen. Missing from the discussion in the last section is Amazon ( AMZN ), which stands out as a positive since it is still trading at a discount compared with the past levels and has potential for further uptick too. With support to its margins for the remainder of this year, even with rising competition, costs and a slowing in the US market, the stock can continue to inch up.

Next, the weight of the communications sector has now increased 15.4% making it the second biggest sector constituent, compared to the consumer discretionary sector a quarter ago. With a fast 24.5% increase in the S&P 500 Communication Services Index YTD along with a forward P/E at 19.15x, which is lower than that for QQQ as a whole.

Sector Weightages, QQQ (Source: Invesco)

Finally, the consumer discretionary sector is now far less significant. In March, it had a weight of 19% in QQQ, which is now down to 12.15%. This is unsurprising considering that the S&P 500 Consumer Discretionary index has risen by just 4.7% YTD , which coincides with a cooling off in consumer demand in the US. Its relatively lower weight in the fund now implies that the fund can be even less vulnerable to expected macroeconomic fluctuations.

There’s still a good chance that QQQ can continue to perform better than the S&P 500 this year. But that's not saying much considering that the risks to the S&P have risen even more because of its exposure to cyclical sectors.

In fact, there are genuine risks to QQQ on account of steeper valuations for its biggest constituent stocks. If these result in a sell-off in technology stocks, the fund can plunge.

The downside can be tempered by support from select stocks like Amazon and sectors like communications, but to what extent, remains to be seen. While there’s little doubt that the robust constitution of the fund can still deliver good returns in the medium term, I think there could be pullbacks in the short-term, which can lead to a better price point to enter. With that in mind, I’m downgrading QQQ to Hold.

This article was written by

Manika Premsingh is a macroeconomist converting big-picture trends into actionable investment ideas. She has worked in investment management, stock broking, and investment banking. Manika received the Goldman Sachs 10,000 Women scholarship for certification in business in recognition of her work as an entrepreneur while running her own research firm.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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OPTIONS TRADING: SPECIAL TAX RULES

There are specific tax rules that all options traders should understand.

This guide will explain some of the aspects of reporting taxes from options trading. We will highlight specific adjustments required when options are sold, expired, or exercised. And we will examine special rules that apply to some ETF and index options.

• Capital Gains from Option s
• Option Expiration
• Option Exercises and Stock Assignments
• Selling Puts Creates Tax Problems
• ETF and Broad-Based Index Options

TAX RULES FOR CALCULATING CAPITAL GAINS FROM TRADING OPTIONS

Calculating capital gains from trading options adds additional complexity when filing your taxes.

A stock option is a securities contract that conveys to its owner the right, but not the obligation, to buy or sell a particular stock at a specified price on or before a given date. This right is granted by the seller of the option in return for the amount paid (premium) by the buyer.

Any gains or losses resulting from trading equity options are treated as capital gains or losses and are reported on  IRS Schedule D and Form 8949 .

Special rules apply when selling options:

IRS Publication 550 page 88 features a table of what happens when a PUT or CALL option is sold by the holder:

• If you are the  holder of a put or call option  (you bought the option) and you sell it before it expires, your gain or loss is reported as a  short-term or long-term  capital gain  depending on how long you held the option .
• If you held the option for  365 days or less  before you sold it, it is a  short-term capital gain .
• If you held the option for  more than 365 days  before you sold it, it is a  long-term capital gain .
• However, if you are the  writer of a put or call option  (you sold the option) and you buy it back before it expires,  your gain or loss is considered short-term  no matter how long you held the option.

OPTION EXPIRATION

All stock options have an expiration date. If an option expires, then this closes the option trade and a gain or loss is calculated by subtracting the price paid (purchase price) for the option from the sales price of the option. It doesn’t matter if you bought the option first or sold it first.

If you bought an option and it expires worthless, you naturally have a loss. Likewise, if you sold an option and it expires worthless, you naturally have a gain. If your equity option expires, you generated a capital gain or loss, usually short-term because you held the option for one year or less. But if it was held longer, you have a long-term capital loss.

IRS Publication 550 page 88 features a table of what happens when a PUT or CALL option expires:

• If you are the  holder of a put or call option  (you bought the option) and it expires, your gain or loss is reported as a  short-term or long-term  capital gain  depending on how long you held the option .
• If you held the option for  365 days or less  before it expired, it is a  short-term capital gain .
• If you held the option for  more than 365 days  before it expired, it is a  long-term capital gain .
• However, if you are the  writer of a put or call option  (you sold the option) and it expires,  your gain or loss is considered short-term  no matter how long you held the option.

Sounds simple enough, but it gets much more complicated if your option gets exercised.

OPTION EXERCISES AND STOCK ASSIGNMENTS

Since all option contracts give the buyer the right to buy or sell a given stock at a set price (the strike price), when an option is exercised, someone exercised their rights and you may be forced to buy the stock (the stock is put to you) at the PUT option strike price, or you may be forced to sell the stock (the stock is called away from you) at the CALL option strike price.

There are special IRS rules for  options that get exercised , whether you as the holder of the option (you bought the option) exercised your rights, or someone else as the holder of the option (you sold the option) exercised their rights.

IRS Publication 550 page 88 features a table of what happens when a PUT or CALL option is exercised:

Your option position therefore does NOT get reported on Schedule D Form 8949, but its proceeds are included in the stock position from the assignment.

When importing option exercise transactions from brokerages, there is no automated method to adjust the cost basis of the stock being assigned. Brokers do not provide enough detail to identify which stock transactions should be adjusted and which option transactions should be deleted.

TradeLog software includes an Option Exercise/Assign function, allowing users to make adjustments for most exercise and assignments situations. See our  User Guide  for details.

SELLING PUTS CREATES TAX PROBLEMS

Put selling, or writing puts, is quite popular in a bull market. The advantage of this strategy is that you get to keep the premium received from selling the put if the market moves in two out of the three possible directions.

If the market goes up, you keep the premium, and if it moves sideways, you keep the premium. Time decay which is inherent in all options is on your side. Quite a nice strategy.

Tax Preparation Problems

Since the focus of our site is trader taxes, and not a commentary on various option trading strategies, we will concentrate our discussion on the potential problems that this particular strategy sometimes creates when attempting to prepare your taxes from trading.

If the market heads down (one of the three possible directions), you may find yourself owning the stock as the option may get exercised and the stock gets put to you at the strike price.

IRS Publication 550 states that if you are the writer of a put option that gets exercised, you need to “Reduce your basis in the stock you buy by the amount you received for the put.”

Real World Example

This may sound simple, but as usual when it comes to taxes and the real world, nothing is quite that simple as the following example will show:

With stock ABC trading above $53, Joe decides to sell ten ABC NOV 50 PUT options and collect a nice premium of $4.90 per contract or $4,900.00. With current support at $51.00 and less than 5 weeks till expiration, these options should expire worthless and Joe keeps the premium.

In addition, Joe is profitable all the way down to $45.10 ($50.00 – $4.90). So far so good.

But unexpectedly, the market goes against Joe, and ABC drops below the $50 range. Joe is still profitable but he is now open to the option being exercised and the stock being assigned or put to him at $50.

Here is where the fun starts:  If all ten of the option contracts get exercised, then 1,000 shares get put to him at the strike price of $50. His brokerage trade history will show this as a buy of 1,000 shares at $50 each for a total cost of $50,000.

But according to the IRS rules, when preparing his taxes, Joe needs to reduce the cost basis of the 1,000 shares by the amount he received from selling the put.

$50,000 – $4,900.00 = $45,100.00 (Joe’s adjusted cost basis for the 1,000 shares)

But like we said, nothing in the real world is easy. What happens if the ten contracts do not all get exercised at the same time?

What if two contracts get exercised on day one, three on day two, four more later on day two, and one on day three resulting in his buying four different lots of ABC stock being purchased at $50 per share? How does the premium received from the puts get divided up among the various stock assignments?

You guessed it, Joe bought 200 shares on day one at $50 for a total of $10,000 but he needs to reduce his cost basis by 20% (2/10) of the $4900 premium received from the puts. So his net cost basis for these 200 shares would amount to $9,120 ($10,000 – $980.00) commissions not included.

The same goes for the three other purchases of 300, 400, and 100 shares each with the remaining option premium divided accordingly.

In addition, the option trade needs to be zeroed out because the amount received from the option sale has been accounted for when reducing the stock cost basis.

Brokerages Offer Little Help

Now you would think all of this required accounting would be taken care of by your stock brokerage. Hardly. Prior to 2014 tax year, most brokers simply report the individual option sale and stock purchase transactions and leave the rest to you. Some brokers attempt to identify the exercised options and the corresponding stock assignments, but leave much to be desired in the way they do so.

TradeLog to the Rescue:

This is an extremely difficult, if not impossible problem to overcome with any automated trade accounting and tax software program. Few, if any, tax software programs designed for traders or investors handle this without much fuss and manual adjusting.

Thankfully, TradeLog is able to make all such necessary adjustments with just a few clicks of your mouse!

EXCHANGE TRADED / BROAD-BASED INDEX OPTIONS

If you trade exchange traded index options (ETF/ETN options), or other non-equity options such as on bonds, commodities, or currencies, the results of a sale are treated differently.

For example, options on the SPX, OEX, and NDX are not directly or indirectly related to a specific equity (stock), but are exchange-traded options of index stocks. These are subject to the provisions of IRS Code Section 1256, which states that any gains or losses from the sale of these securities are subject to the 60/40 rule (60% of gains and losses are long-term and 40% are short-term, regardless of how long the securities are held). Non-equity options are usually reported on  IRS Form 6781 (Gains and Losses from Section 1256 Contracts and Straddles) .

Please see our  Broad-Based Index Options user guide page  for a complete list of index options marked by TradeLog as section 1256 contracts. TradeLog also allows users to define additional securities as broad-based index options in the Global Options settings.

There have been many conflicting opinions as to whether QQQQ, DIA, and SPY options should be treated as section 1256 contracts or not. Since these do not settle in cash, as do most section 1256 contracts, some suggest that these are not section 1256 contracts. Others feel that they meet the definition of a “broad-based” index option and therefore can be treated as section 1256 contracts.

A recent article in Forbes magazine highlights just how complex the tax laws are when it come to Options and ETFs, and why you cannot rely on your broker 1099-B for proper tax treatment:  Tax Treatment Can Be Tricky With Options and ETFs .

As always, it is best to contact your tax professional for advice before arbitrarily categorizing your index options trades.

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Tommy wild | jun 29, 2024.

• Cleveland Guardians

The Cleveland Guardians made a plethora of roster moves on Saturday morning as they prepared for the third game of a four-game set with the Kansas City Royals. All of these moves had to do with the pitching staff and what it would look like moving forward.

Eli Morgan Activated From IL 

The Guardians are getting some reinforcements on the pitching front as the team activated RHP Eli Morgan off of the injured list. 

The right-hander has suffered two injuries so far this season with the latest one being elbow inflammation. He also spent time on the IL earlier this season with shoulder inflammation. It’s great to add Morgan back to an already dominant bullpen.

Morgan has pitched in 10 games this season and has a 1.64 ERA and 1.18 WHIP.

Matthew Boyd Placed On 15-Day IL

The Guardians officially signed LHP Matthew Boyd , but immediately placed him on the 15-day injured list. Boyd at some point could be a factor in Cleveland’s rotation, but that will have to wait.

Darren McCaughan Option To Triple-A

The Guardians have called on RHP Darren McCaughan a few times over the last week to give them valuable innings. Friday night was his latest appearance as he threw 78 pitches in 4.0 innings to save Cleveland from needing to use any other relievers in a blowout game.

Zak Kent Designated For Assignment 

The Guardians traded for RHP Zak Kent at the end of March to help the Columbus Clippers (Triple-A) with their pitching depth. Kent only appeared in three games for the Clippers before he was designated for assignment in order to make room for Morgan on the 40-man roster. 

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MLB trade deadline watch: White Sox scout contenders, Mason Miller’s value and more

By Ken Rosenthal, Patrick Mooney and Katie Woo

MLB trade deadline watch is a collection of news and notes from our reporting team of Patrick Mooney, Will Sammon, Katie Woo and Ken Rosenthal.

The White Sox in recent weeks have assigned top scouts to focus on the Padres’ , Dodgers’ and Mariners’ farm systems, according to sources briefed on the scouts’ movements. All three of those clubs have shown interest in multiple White Sox players, but are far from the only ones engaged with Chicago on potential trades.

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Still, the White Sox’s scouting activity might be a tipoff to how they will approach the deadline. If they lean on field scouts, it means they likely want prospects with big tools. The Padres, Dodgers and Mariners all have those types of players in considerable supply.

As previously reported , White Sox left-hander Garrett Crochet is a Padres target. Reliever Michael Kopech and outfielder Tommy Pham are among the other potential fits, and Padres GM A.J. Preller remains aggressive — or is it impatient? — in discussions.

The Dodgers also like Crochet as well as center fielder Luis Robert Jr. , major-league sources said. The Mariners, whose combined outfield OPS ranks 23rd in the majors, clearly could use Robert. But unless Robert gets hot, the White Sox fear that if they trade him at the deadline, they will be selling low.

Robert, who turns 27 on Aug. 3, missed nearly two months with a right hip flexor strain. Through Sunday, he had batted only .191 with a .265 on-base percentage since returning. His seven home runs boosted his OPS to .737, but he has been inconsistent, not a game-changer.

All that can change in the next month, but Robert’s frequent injuries, low walk and high strikeout rates are a concern for interested clubs.

Teams likely will want to see more before giving up what the White Sox want for a player who last season hit 38 homers and stole 20 bases. Robert is owed the balance of his $12.5 million salary in 2024 and $15 million in ’25. His deal also includes $20 million club options for 2026 and ’27.

MLB trade target tiers: Ranking 92 hitters, starters and relievers who could be available

Will A.J. Preller deal Padres’ top prospects?

While a number of people in the game are speculating that Preller is trying to bolster his roster to save his job, what would be the difference between this supposedly desperate version of Preller and the way he normally acts as GM?

One litmus test for Preller will be whether he moves Leodalis De Vries , a 17-year-old shortstop whom the Padres signed out of the Dominican Republic last January for $4.2 million.

De Vries and catcher Ethan Salas are thought to be as close to untouchable as any players in the Padres’ system. The Padres are telling clubs they do not want to trade them. But in the case of De Vries, is it possible Preller is taking that stance only to whet the appetite of interested clubs? As Preller previously has shown, if he can acquire the right player, no prospect is off-limits.

In his 2nd pro game, 17-year-old Leodalis DeVries is quickly racking up 1sts: ✔️ 1B ✔️ SB ✔️ 2B @Padres | @Storm_Baseball pic.twitter.com/9Xj0C7riri — MLB Pipeline (@MLBPipeline) April 24, 2024

Juan Soto was an example. To get him, Preller parted with left-hander MacKenzie Gore and outfielder James Wood , among others. Dylan Cease was another highly desired target. Preller initially balked at including right-hander Drew Thorpe in that deal, according to a source briefed on the discussions, but eventually relented.

As things stand, no player the caliber of Soto or even Cease figures to be available at the deadline. The Padres have other players of interest, including left-hander Robby Snelling and righties Dylan Lesko and Adam Mazur . But Preller, following the death of late Padres owner Peter Seidler, is working under new bosses. How that influences his behavior remains to be seen.

Potential starting pitching targets dwindle

The fallout from the Angels’ Patrick Sandoval and Marlins’ Jesús Luzardo and Braxton Garrett all hitting the injured list over the weekend?

The demand for starting pitchers is virtually certain to exceed the supply, so teams will need to figure out internal solutions.

The Guardians , for example, are discussing how to best keep their own pitchers healthy and effective while developing creative options in their own system, according to sources briefed on their thinking.

That’s not to say the Guardians will give up on trying to add a starter. But even if they do, they will need additional help. Righty Gavin Williams, out all season with elbow inflammation, is expected back by next week. Lefty Joey Cantillo , a prospect who recently returned from a left hamstring strain, is building up at Triple A.

While the Guardians are getting strong work out of Tanner Bibee and Ben Lively , a return to form by fellow righty Triston McKenzie could be a pivotal development.

McKenzie, who made only four starts last season because of an elbow sprain, seems to be growing more comfortable with throwing hard again. He has shown improved average fastball velocity in his three most recent outings, jumping from 92.5 mph to 94.3 to 95. The trick now is for him to regain his command and look more like the pitcher he was in 2022, when he had a 2.96 ERA in 191 1/3 innings.

Kyle Hendricks’ full-circle moment

Cubs pitcher Kyle Hendricks will reach 10 years of major-league service time on Wednesday and gain full no-trade protection. Those 10-and-5 rights — 10 years in the majors and the past five consecutive seasons with the same team — represent a full-circle moment for one of the most consequential pitchers in franchise history.

At the 2012 trade deadline, Hendricks wound up going to the Cubs organization only after Ryan Dempster had previously used his no-trade power to veto a deal with the Braves . In the spiked trade proposal, the Cubs would have received Randall Delgado, a pitcher they wouldn’t have started in a Game 7, an assignment Hendricks calmly handled during the 2016 World Series.

With Dempster’s hopes to go to the Dodgers fading, and Atlanta no longer an option, the Cubs engaged with the Rangers and executed the kind of trade that selling teams dream about every summer.

Hendricks wasn’t the top-rated prospect included in the deal — third baseman Christian Villanueva had a higher profile at that time — but an external source familar with the Texas farm system recommended the finesse pitcher from Dartmouth. That scouting tip about Hendricks combined with Dempster’s deliberations helped transform Chicago’s rebuild.

At this time of year, executives are attached to their phones, constantly trying to assess the trade-deadline landscape while simultaneously preparing for the draft. Scouts follow players for years, gradually accumulating information and hoping their voices will be heard when it’s time to make those last-minute decisions. Sophisticated computer programs can project future value. But some of this is simply random.

“Just another lucky roll of the dice,” said Hendricks, the last player remaining on the Cubs from the 2016 championship team. “That’s how everyone’s journey happens. You don’t get to this level without luck, so there have been a lot of things that have just gone my way, being in the right place at the right time.”

Among all Ivy League athletes who have reached Major League Baseball , the NFL , NBA and NHL , the Dartmouth grad is believed to have made the most money ($84.8 million) through his professional contracts as a player, according to research and information from sources. The best comp would probably be Ryan Fitzpatrick, the former NFL quarterback out of Harvard who earned approximately $82 million during his playing career, per Spotrac.

Hendricks has also produced more WAR (21.9, per Baseball-Reference) than any other Ivy Leaguer during MLB’s draft era (since 1965). That group includes two players-turned-executives who could shake up this year’s trade deadline: Rangers general manager Chris Young (Princeton) and Red Sox chief baseball officer Craig Breslow (Yale).

Mason Miller ’s hefty price tag

A’s closer Mason Miller will be one of the most heavily sought after arms this deadline. He’ll also come with a hefty price tag, one that was exponentially high in late April and doesn’t seem likely to come down this July. High-leverage relievers are often the most coveted trade pieces for contending teams, and there is arguably no better reliever in baseball this year than Miller. His 101 mph four-seamer has blown hitters away all season, giving him the highest chase rate (39.7 percent), whiff percentage (42.4 percent) and strikeout percentage (46.5 percent) in the league.

It’s the obvious play to connect contending teams to Miller. With five weeks to go until the trade deadline, there are only a handful of teams other than the A’s (the White Sox, Marlins and Rockies) who are considered true sellers. In theory, Oakland should capitalize on a market that will clearly favor the seller. There’s no scenario where Miller won’t be moved at the deadline, right?

Not exactly. Some industry sources believe Oakland’s asking price for Miller will be deemed too high, and that the 25-year-old will remain in the Bay Area this season.

“I don’t think they’re going to move him,” one league source said. “He’s too premium of a guy.”

Oakland’s vantage point comes down to the abundance of team control remaining on Miller. He won’t be eligible for arbitration until 2026. Free agency is out of the question until 2030. In trading for Miller, a team would be acquiring one of the top relief arms in baseball along with five and a half years of control. That will allow the A’s to essentially name their price — and that price will be nothing short of aggressive, if not unreasonable.

“(Oakland) will ask for way too much,” the source said. “It’s going to be absurd. They have too much control over him. There aren’t many star guys out there right now that are super controllable. It would have to be a crazy good package.

“Never say never, but he’s so controllable and he’s such a critical part of their team. I think they’d have to be blown away.”

(Top photo of Garrett Crochet: Quinn Harris / Getty Images)

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