wilmott.com

All right, closed short covered call position for $4,070.95. Then realized I was in Wile E. Coyote territory with bull call spread, and market started moving against me. Closed for $684.40.

So up $1,756.79 to originally open position, up $3,000 and down 100 DJT upon short call exercise, down $4,070.95 to close short covered call position, down $684.40 to close bull put spread. Up $1.44! If my arithmetic is correct and I haven't missed something!

And it remains to be seen whether I get dinged for borrow costs on DJT.

Absolutely not worth it, if for nothing more than having to pay attention to early exercise.

It does raise the question of some of the mathematics of American-style options with high borrow costs for the underlying. Normal mathematics gets flummoxed, I think, because essentially the underlying's value is assumed to decay. Maybe replace S in put-call parity equation with essentially value of stock future, reflecting borrow cost?

Yes, I missed that aspect, too. But, in hindsight, I think that is the "standard" way to treat hard-to-borrow: treat it as a stock with a 'pseudo-continuous-dividend-rate' equal to the lending rate. Then, it can become quite rational (for an institutional player) to exercise the long call early to capture the pseudo-dividends (lending income). Of course, when that rate is fluctuating wildly, things are even trickier. 

I will guess they will hit you for one day's borrow cost. At my broker, they charge one-day's borrow just for entering a short-sale trade -- even if not executed -- because they say they have to reserve the stock to even accept the order. Quite the racket!

Well, this has been very interesting to follow along!

I think it is the case that, had markets been continually open, it would have made more sense for my counterparty to buy the stock and sell the call rather than exercising the call. Theory doesn't really deal well with market closures.

Anyway, interesting experiment. Put-call parity violations were far less pronounced today.

Two days after being briefly short DJT, still no borrow cost assessed.

I won't be terribly confident that's going to hold until after the end of the month.

There is a paper on modified options valuation when short borrowing rate is accounted. I can't find it quickly, but it was considered. 

In general your cost for shorting the stock will be prorated for the number of days when kept short position before covering. In the extreme case of day trade you should not be charged by decent broker. 

P.S. You might want to check your charges for borrowing cost on your monthly statement. 

Update: they dinged me for about $106, as threatened.

:-/