This is actually a risk you assume during an open and functioning market with automatic exercise in expiration. But if Seattle is bombed, you can bet I'll be exercising puts until my margin dries up or my broker pulls it.
For put options, yeah that's more obvious. But what about for call options? Let's say, the market is all of sudden shut down with the market price of a stock at $60, the strike on the call that you bought is at $50. Since the market is shut down so you can't sell the option anymore, do you exercise to get the stock to at least get something or do you let the option expire worthless? According to the .jpg that you posted, in the situation where the physical delivery is not possible because the stock being unavailable, it could be cash settled (I don't think OCC EVER rejects an exercise request because of unavailability of the physical assets, only in the case of the request being invalid). But at what price? At $60 market price just before the market shut down or the new price when the market is re-opened which could be much lower? What if the market price is now at $40 after the exchange is re-opened? You would've lost just because of the exercising.
Well, my read on the not deliverable securities would be a function of float, not market time (I.e. More open interest than floating shares to deliver because a single owner controls too much....maybe SHLD?). So long as the majority of short interest is market makers, they have the delta hedge that means they have enough shares to deliver. I'd like to think I'd catch the panic of the $10 ITM call was jeopardized. Ideally I'd short and accept delivery against my short position. ITM puts would scare me more just because you're unlikely to induce panic in the market by rapid advances in price.
Well for calls, you wouldn't have shorted at the time when the call is ITM before the market shutdown anyway. Why would you to risk getting assigned? You wouldn't know there would be a market shutdown brought up by a sudden unforeseeable event like 9/11 that would shut down the market. NOBODY woke up that morning expecting that two buildings in a major financial center along with Pentagon would get attacked by commercial airplanes. Nobody would foresee that the price would be so low after the market is opened that you would actually make a fortune if somebody exercised those calls against you. ITM puts I assume you are talking about being short in them would actually be less scary unless you don't have enough money in the account. You would just get assigned and get stocks that are now super cheap and realize an immediate loss due to the put ITM.
Sorry, I wasn't clear. I mean short shares against my long call to lock in gains. But, you're right, it's not likely I'd catch the panic move.
Your own link doesn't say that. It says "... holders of American-style options, other than delayed start options for which an exercise price has not yet been set, would still 140 be able to exercise unless exercises were restricted. (However, OCC or an options market may restrict the exercise of an option while trading in the option has been halted, and the restriction may remain in effect until shortly before expiration. " The rest of "Other Risks" gives blanket scenarios where that sounds like that could be overruled. The bottom line is options trading will halt during a Presidential Order, and option holders' only out is exercising if that also isn't restricted. There is no recourse, and there certainly is no handing extra money to holders through a "redating" which is never mentioned in this glorified TOS safe-harbor.
Who mentioned anything about "redating"? I was merely stating the risk from even delayed exercising after the exchange is opened. Can you read what I wrote before you troll please?