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newwurldmn

Registered: Apr 2011
Posts: 2622

10-13-12 10:01 PM

Technically while the option expires on Saturday the OCC requires instructions by Friday at 5:30 or 6:30. I can't remember the time.

There was one trade I did where the govt was going to issue a report on Medicare on Friday evening. Expiring options priced in nothing. It was essentially free gamma.

But there's a reason why premium should exist. Just because an option is out of the money, doesn't mean you wont get exercised. You aren't trading max(s-k,0) but rather the right to buy stock which doesn't have to be optimally done. This risk is worth money for an option that's a little out of the money.

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m0gambo

Registered: Aug 2008
Posts: 1

10-14-12 06:29 AM

Be very careful scalping time premiums of high priced stocks with interactive brokers if they are close to in-the-money. They will look at what will happen if you got exercised those options and automatically close the options if you do not have enough margin to hold the long/short position. It does not matter that you have enough margin to hold the call/put spread.

I have gotten burned a couple of times now with this. Maybe my own fault but it would be nice to get a notice of 1 or 2 minutes to close the options yourself. All I can tell is it seems to be about 15-20 minutes before the close.

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trader198

Registered: Mar 2010
Posts: 1217

10-14-12 04:45 PM

on expiration friday, what I would say is: avoid OTM. trade ITM is better.

pre-expiration, buy OTM.

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FSU

Registered: Jun 2010
Posts: 239

10-14-12 07:35 PM

Quote from newwurldmn:

Technically while the option expires on Saturday the OCC requires instructions by Friday at 5:30 or 6:30. I can't remember the time. .

The cutoff time is 5:30 eastern time on Friday, but many brokerage houses have an earlier internal cutoff for their customers.

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cdcaveman

Registered: Aug 2011
Posts: 3514

10-14-12 08:34 PM

Quote from trader198:

on expiration friday, what I would say is: avoid OTM. trade ITM is better.

pre-expiration, buy OTM.

close to the monies that you think will go into them money..

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