Can one choose to not settle an ITM option at expiry?

No, I'm sorry, but just no. Nothing about his post is "technically correct." This is not (as another poster asks) a question about the tax implications of "exercise" vs. "close the contract pre-expiry." OP simply doesn't understand how tax rates work. Which is fine -- taxes are complex -- but please don't call it "technically correct." He should consult with an accountant before making financial decisions about contracts for tax reasons (or just read more about taxation law).

 

Agree. My answer implied the same as your response but you were clearer to the point.

 

Yes... but that's not the point. It's an illustrative example.

This is the point. Can auto-execution be prevented?

 

This is not a tax question... that was just an illustrative example.

It is a question about options: can auto execution and deposit be prevented?

 

Without addressing all of the ancillary issues - OCC delivers to your broker a "contrary exercise list" two days prior to any expiration. You want to chat with your broker to make sure they offer up the opportunity to you to not exercise and have them walk you through what happens. Very very few brokers even acknowledge the list.
The brokerage firm itself details in the options agreement what happens then and what rights you both have.

 

The rational decision for an ITM contract at expiry is to bank the profit. That is why brokers auto-execute and deposit.

The question has nothing to do with marginal tax rates or coronavirus.

It's whether I have choice about auto close and deposit.

 

why just not sell the option at expiration date, seem the much more logical thing to do ...

 

THANK YOU. glad that someone actually read the question, understood what I was asking, and didn't bash me about tax law.

 

but you haven't answered my reply however ... sell the option at expiration date seems the much more logical thing to do in my eyes

 

Right; this is the "Rational" decision--and what I have always done--bank the profit.

Briefly, this question is really more about the notion of a rational market. In today's CV market, with businesses shut down everywhere, a rational market would be in freefall, as cash flows dry up, right?

However, we have QE programs, Powell, etc, which stabilize the markets... and makes them... irrational?!

I'm examining this market in light the Efficient Market Hypothesis and Rational Market theory. What is an efficient market including intervention in all forms?

...so I wanted an example of an irrational decision.