IB does have some latitude but as each case needs to be taken on an individual basis I can't promise anything other that to say that your comments above are in line with policy. I'll repeat again that late notifications are rare and given the millions of option contracts flowing through our system per week/day, if this was a common occurrence, I'd have to believe that numerous people on this board would be commenting. Our accounting of exercise/assignments is quite good and I for one don't think this is a big issue. Assignments are done in batches. Thus you should not see one leg of a position assigned and find out later in the day another position in the same market has been assigned. An options trader should also be able to quantify to a high degree what and if should be assigned on any given day and if there is a question they can always contact the CS desk for clarification. Hope this helps.
Just to support Def.... It is very unusual to have late option assignments at IB or with any other brokerage firm; however, it would be irresponsible for IB or any other brokerage firm to state that this would never happen.
1) Does "liquidate last" allow you to specify e.g. 10 positions, and leave 1 or 2 as candidates to liquidate? 2) Reading minds is not the point, rather finding the leg which causes the biggest margin problem, which IB seemingly is claiming the auto-liquidate achieves. 3) It is not close to market edge if you are doing positions which are hedged. It sound like you don't trade many spreads. 4) Other brokers don't have a 10 minute deadline to reformulate your position.
Thank you Def. I am not sure what paragraph one means, i.e. if IB accepts responsibility or not to allow a grace period if there is a wide scale delay and a midday assignment occurs. IB is in a better position than anyone to assess the frequency; assuming it is rare, there should be little or no threat of liability for IB to simply assume responsibility for unfair/ unintended liquidation of a customer position which would now have to be reformulated. The net benefit to IB of automating liquidation would still be enormous.
Before entering into a combination trade involving stock options, you can make a very good guess as to whether or not you are likely to get assigned: - the calls get exercised on the day before the stock goes ex-dividend - this means it is 4 days out of 252; further, the calls have to be in the money for the exercise to make sense - the puts can get exercised any day, but for the exercise to make sense the holder of the put has to make more money by earning the interest on the premium than on the time value of the option (a good approximation for the latter is the call price at the same strike); in simple words the put has to be deep in the money for the exercise to make sense Hence, if you stay out of shorting deep in the money puts any day and shorting in the money calls on days before the stock goes ex-div, you should not get assigned.
Important you added this clarification. Of course one should be noting the amount of time premium. Puts the day of ex-dividend, and front month options even not so deap in-the-money as well are more likely. Looking at the number of outstanding in-the-money options with low and no time premiums may give one an idea of people's trading patterns and number of occurrences. It can occur from calendar spreads which turned in-the-money as well.
def: how come IB does not provide an email notification on assignment? I don't think this is too much to ask, in light of the simple automation nature of this procedure.
Def, my apologies. For IB's and the customers' protection: I was in contact with someone who checked into this issue carefully, who says the only way to know about an assignment is by actually logging into the account, and there is no indication on the statement as to whether or not there was an assignment that day--nor would the receiving of a statement indicate the account would at that time reflect if there was or wasn't as assignment; rather (at this time at least), the statement merely proides the customer a link to log in.
The statement has a code (Ex - I think) beside any contract that was exercised that day. If you choose to have your statements emailed, you will see the code in the emailed statement. With IB, you are not required to log into the account to see that you have been exercised. In fact, logging in would just show the contracts are missing and not what happened to them unless you view the statement.