Subject: Re: Can't belive I did that
AFAIK everything happens the instant the market opens. The broker doesn't have to buy 100 shares and then sell them again to deliver them. They just sell 100 shares and leave you with a short position.

Of course. So, Monday morning, after the market is open for trading, the broker buys 100 shares and delivers them, and marks your account as short 100 shares. This is correct. Then you log in to your brokerage account and purchase 100 shares. That negates the short position. BOTH THOSE TRADES settle on the same day, because BOTH THOSE TRADES were made on the same day.

One comment summed it up: "Why would you ever allow yourself to be in this position?"

Most of the time, you avoid being in that position if possible. Not so much because it is "bad" per se, but because it removes some of your choice. And you can't always prevent being in that position because with USA-style options, the holder can exercise them at any time (European-style options can only be exercised at expiration). So, you can wake up one morning and see an email from your broker that you were assigned. This happened to me a few weeks ago with some short Disney puts, for some odd reason, someone exercised puts (against me) that still had some time value in them. In other words, it would have been [a little] more profitable for them to sell the put than to exercise the put. But nevertheless they chose to exercise.

In fact, it has happened to me a number of times over the years. For example (I've mentioned this example before), over the years, I have held BCS (Bull Call Spreads) on Apple during many periods. Spreads allow you choose any level of risk, and any commensurate level of potential return, you choose (they are really nice in that regard). However, one issue with BCS is that the upper part of the spread is a short call, and sometimes the stock moves fast which puts that call "into the money". And sometimes on dividend day, it is profitable for the holder of that call (that you sold) to exercise it. That's called capturing the dividend by owning the stock on ex-div day. So, one time, on 8/6/2014, someone exercised the top of my BCS (a Jan '15 400/500 BCS, which turned into a Jan '15 57.14/71.43 BCS post-split). Anyway they exercised it, and they paid me $71.43 for each share. Instead of relinquishing any of my long-term held shares, and having to pay a hefty long-term capital gains tax bill, I opted to buy the shares, at $95.08 each, on 8/7/2014. That means, that in order to keep those shares, I contributed an additional $23.65 per share ($95.08 that I pad minus $71.43 that I received). I also had to pay $0.47 in lieu of dividend to the new holder (basically because I was short those shares on ex-div day). And after that date, I was left with my original long-term shares, and only the lower part of a BCS, basically I was long Jan '15 57.14 calls. With the stock near $100, and later over $100, those calls were worth quite a lot. Anyway, on the next dividend date, 11/5/14, I decided to exercise those calls. I received the shares for $57.14 each, and my basis was adjusted up to account for the premium I paid for those calls when entering the BCS trade (way back in Jan of 2013). And, on 11/13/14, whomever was short those shares (briefly) on ex-div day send me a dividend (in lieu) of $0.47. And interesting tidbit is that dividends in lieu are not qualified dividends and are always taxed as ordinary income. Today I still own almost all those shares that I acquired accidentally because someone exercised the upper part of my BCS to swipe the dividend (and then I disposed of the lower part of the BCS by exercising instead of selling). Had that person not exercised, I would have simply disposed of the BCS by selling it (by selling the lower part of the spread, and buying [back] the upper part of the spread in one trade) once it reached the profit I wanted as I usually do for BCS. Keeping [most of] those shares all this time has turned out to be my most profitable trade ever, if not %-wise, definitely and by far $-wise.