exercise slippage ?

Discussion in 'Options' started by fare_game, Sep 20, 2005.

  1. fare_game


    Uppon expiration of an options, wethaer you are the under writer or the one exercising it, has any one of you experienced slippage so to speak due to delay of not been able to sell / buy at desired
    spot price? or stock price..

    I heared a broker speaking of the headache it takes to exercise an option uppon expiration..

  2. An option contract is an agreement that must be respected at delivery by both parties, you are not purchasing the underlying on the open market: it is a transaction between the writer and the buyer.
  3. I know you are buying ( long call ) selling ( long put ) at a price but there will be a slippage when closing the underlaying position.
    also, if this is futures options, you can not do anything 'till 8 am est any way, so if it was itm at 12 midnight est and it is profitable if exercised, and in the morning it is otm, well too bad since you are not able to exercise it at midnight, since futures options do not trade after 3 pm est.

    slippage potential ...the whole 17 hrs from 3 pm at night till next morning 8 am the price can move against you
  4. Hold the presses!!! I just came up with an IDEA! What if you put out a limit order during the overnight session so that it the future rises above the strike price of you call you can offset the position with a short future! You could even make it a bracket order so you can buy it back at a profit! All this while you sleep!!!
  5. i am not short on futures...i am assuming that i am long

    and now it is itm, and i want to be able to exercise it.

    but cannot since options market is closed...remember it is midnight , and the price is deep itm.
    have to wait till the morning to xercise it.

    by that time it is back to otm or lost its deep itm value uppon exercising it.

    its crazy because options for futures is only open 8-3 pm but futures trade 23 hrs..

    what a rip off
  6. Okay cloned from god, I am suggesting that you use futures to offset you option position during the night. Once you option is in the money you can reduce you overall risk by taking the opposite position in the underlying.

    Say you bought a put on the euro dec futures with a strike of 1.2000 at 2:30 this afternoon. You tried to sell it at a profit but could not get a fill, so just before bed you take a look at the market. You then decide that you should buy the futures for 1.1971 so you put in a limit order at that price. Hopefully when you wake up in the morning you will have a profit on both positions.
  7. i failed to realize that it is better to sell a 'bought itm option 'than exercise it..

    just doing a demo...i'm noob.

    [current spot - strike ( for call )] or [ strike - current spot ( for put )]

    is less than

    the profit taken from reselling a ' bought itm option '


    in either case i understand what you are doing to hedge it.

    got it



  8. ofcourse time decay is bad...

    so depending on that , it may be better to exercise it arround its expiration date..i dono..

    in any case i understand how to hedge my gains now

  9. nassau


    I can you personally and from comments from the brokers that the fact you get filled is an option..you do not necessarily have to get filled and in a lot of cases you won't.
    In many occassion..not an exception...you can write a put or call out of the money only to find out the next day or so that you are out of the money...ie ..write a call and received a dollar, the stock falls 2dollars and the bid/ask is 1.40/45...volitility, delta etc all change the price of options throuhout the day...
    I have had many occassion that on expiry or a few days before you will see a bid/ask spread that takes a lot if not all of your profit...
    unless you don't care and are looking at receiving the position...

    good luck