Response to Def and nonprophet: There seems to be a difference of opinion among the IB employees. A relative of mine (who I recommended to IB) has two e-mail exchanges with different IB employees saying midday assignments CAN YES occur. One employee is John W, the other John S; if you wish, I could arrange it to be forwarded to you on PM. The second employee said it was not common, but YES possible. Def, please work this out. If YES so, then please inform if that would impact maintenance requirements for same day (and potentially lead to liquidation at any time of day), or if relevant only to the next day. John W seemed to be saying it could happen even 5 minutes before the close.
Def, a) Does the 10 minute deadline apply even if you are in the middle of handling it yourself? b) Are you enabled to reformulate the spreads when an assignment occurs, or must you always dump your positions? TorontoTrader2's links and your message only mention liquidating, which is quite frightening. I had viewed an assignment till now as good news, because the buyer sacrafices the premium, and then you sell more of the same (keeping things balanced while liquidating the stock which was assigned).
didn't mean to sound ignorant as I could not imagine it was a "free option", but I've literally seen postings on here, "if I see I am being assigned, I will roll it over to the next month". To me, this implied that you could see early if you were to be assigned during the day and if you closed out your option position before market close, you could not be assigned. It did not make sense as I read it, as you should not be able to dodge a random assignment. The poster may have just sold the stock as you have said that following morning and sold a higher/further strike option and I read it wrong. I don't expect you to help me with option theory, but if I have an option purchased at 45, and I sell a higher strike one at 55, if that call goes ITM and I must honor the assignment, I only have the obligation of selling the stock at the 55 strike. Is it not possible to exercise the 45 call in the morning when I have been assigned and sell that now owned stock originating from the exercise to satisfy the obligation at IB? It's the same thing as a covered call where you would have the shares called away if assigned but just requires an exercise step of the long/lower strike option. I would prefer this rather than using cash to buy the stock and selling it at market for a loss if that difference is greater than the original premium received from the sell of the call. If other people think this is a bad idea, they can feel free to say so, but you achieve a profit of the difference in strikes minus the debit of the calls purchased and fulfill the assignment obligation and it can be done in 10 minutes. By legging in to this your debit is lessened as well. For now, this is my preferred method and I would like to know if and how it's possible at IB as I do not want any positions liquidated (although I should have the cash reserve and it would not be necessary) and I do not want the shares to be purchased automatically that morning and then sold for what will most likely be a loss. Regards, sd
While actual midday assignment seems out of the question, a remote possibility might seem that the system fails to report the overnight assignment early morning and it doesn't show up in your account till midday. Admittedly this could have serious consequences for anyone (like me) considering the morning account status (re. assignment) as final for the day. OTrader, please do share any additional information you may get with the forum here. Thanks.
Update: I sent to Nonprophet via PM 3 e-mail messages from IB regarding the possibility of "real-time assignments"; now we are both awaiting for a response from Def. Anyone else with input, feel free to share.
I followed up on your comments. Assignments take place over night and under normal circumstances you'll have them in your account by the next AM. However, I'm told delays can happen on expirations if there is some unexpected reconciliation problem such that the assignments donât get reported properly. But the assignment process is structurally batch oriented, i.e. It would not be the case under normal circumstances to get assigned 10 contracts IBM calls and then some time later additional contracts (or stock from additional contracts). But this is usually a non-issue. If someone is short deep options, they can assume assignment a delay would only a big problem when the underlying expired on strike.
def, thanks for your prompt reply. Do I understand correctly that these reconciliation problems and consequent reporting delays only happen on expirations and *never* pre-expiration?
In event of a delay, where it clearly wasn't the fault of the client, can one's account still be liquidated intraday with that auto-liquidating system?
In reality, IB processes hundreds of thousands (if not more) assignments per year and 99+% are processed properly and on time. However, life is not perfect and for any number of reasons such as receiving files late from clearing houses, commingling events (such as exercises before a corporate action) delays could occur. When this does happen, we try to fix things as quickly as possible. Usually still before the open but sometimes it comes through late. As for the liquidation issue, that would have to be handled on a case by case scenario.
When you say on a case by case basis, does that mean in a case of late reported assignments it would NOT go on auto-liquidate, and rather there is a thinking mind at the scene? IF the latter, will IB ever reformulate the e.g. condor or butterfly etc. or will is their orientation liquidating to cover any shortage? For that matter, as per my question before, in the normal cases of timely reports and the 10 minute lag time before the system goes on auto-liquidate, is there any way to structure things with TWS for your account to NOT liquidate, rather reformulate the spreads? Or to at least have your account marked by IB to NOT liquidate? Minimally, will the system enable you to reformulate the spreads while you are liquidating the assigned stocks in terms of margin requirements? And will auto-liquidate leave you alone if you are in the middle of handling the problem?