From http://en.wikipedia.org/wiki/Expiration_(options) and other sources, it says that options expire "on the Saturday that follows the third Friday of the month". Other sources ( http://www.investopedia.com/terms/e/expiration-time.asp#axzz2HxvkJJQd ) state that "A public holder of an option usually must declare their notice to exercise by 5:00 p.m. on the Friday". I have a couple of questions regarding this: 1) Is the requirement to declare exercise by 5PM on Friday accurate, or can this time be stretched to as late as Saturday? If the latter, what would be the latest time on Saturday when this can be declared? 2) If an option pinned slightly OTM, can someone declare intent to exercise (hoping that the underlying moves ITM by Monday)? Or, for that matter, can a long option holder declare intent to exercise no matter how far OTM the underlying is?
1-Your broker must file exceptions by 5:30 pm ET Friday. If you want to exercise an ITM option or not exercise an OTM option, you and the broker don't have to do anything. No, you can not extend the time. That 5pm they told you must be a house rule to have time to file the forms. The extra time was sent up to allow time to deal with trades that did not clear on the first pass and were typically resolved Saturday morning. 2-If you are long an option you have the choice. Automatic exercise is .01 in the money. If you want to NOT exercise, you can file an exception if the stock closes anywhere in the money by .01. If the stock is OTM, you can file an exception to exercise with the stock any amount OTM. This is typically an issue when there is news after the close or for traders that don't want Monday morning risk for a few pennies.