I've traded for many years. About 25 years ago I had an option expire at the money. I didn't know if it would be called away. Back then each trade cost me about $30. per trade (if you can believe it...Full service brokerage). They chose not to exercise the option. An example the option is for $30. and the price close is at $30. Will it depend on where it is after hours?? What if after hours it doesn't move, or moves up and down then remains ATM? What will happen on the next day (Saturday) at noon? I know the buyer can exercise, but will they... Will the MM push the trade forward?? Thanks...Just curious
It's not about the MM; at least not by default. The auto-exercise - note the word "auto", there - goes forward if the strike is 0.01 or more ITM at expiration, period (unless the owner tells his broker not to exercise.) Note that the broker does not make or participate in this decision; it's post-expiration settlement, and that's handled by the OCC. The broker is just part of the resolution chain (i.e., in-house settlement, etc.), not the decision maker. However, it is still the buyer's option - as it always is, in American-style options - to exercise at will. In fact, they can exercise it regardless of moneyness or expiration; I've had stock put to me a couple of days before the option expired. I also saw a post - not here, and quite a while back - by some pro trader who was holding a bunch of cheap calls in some pharma stock that were OTM at expiration, and who got news of a major drug approval for that company just after the market closed. He exercised them with great glee, part of which was that the writer of those calls would wake up on Monday to find out that he was well and truly hosed. In short: a penny-plus ITM at expiration or owner's decision before it stops trading (assuming he's got that kind of access) = exercise. Sell accordingly and wisely, grasshoppa.
Technically if it's right on the button at $30 and it's a $30 option - it's worthless. In theory it shouldn't be exercised but as BlueWaterSailor wrote - it's up to the owner. I've heard long ago that the assignment process in these cases is random. If 100 traders own a single call in this example and 23 of them decide to exercise, those 23 exercises are distributed randomly among those that held short through expiry.
Almost correct. It's the exchange that auto exercises not the OCC. OCC only handles clearing not exercising instructions.
Oh, look - a stalker who has followed me from another thread in order to try nitpicking at a microscopic detail! How sweet. I still won't take money from you to let you lick my toes, though. You really should give that up before... uh, never mind; it was creepy from the first moment. Oh, and - to randomly pick a broker - here's what TW has to say about it (emphasis mine): The Options Clearing Corporation (OCC) will automatically exercise any expiring equity/ETF option(s) that close in the money by at least $0.01.
If I transferred 10 BBBY call options at $1 strike to you, expiring tomorrow, would I get to lick your toes? (Don't ask me how I got them).
You're special, ON. I'm a bit ticklish myself, but I'd hire someone you could play those games with. I'll negotiate a cut of the deal with her, of course... not that ~$1200 goes all that far these days.
I don’t think the exchange has anything to do with exercising or assignments. All instructions are passed to and managed by the OCC. the occ determines which member firm holding a short position will be assigned and then the member firm can decide which account will take the assignment. So you can buy your option from the Pcoast and when you exercise, someone who sold on the amex is assigned.
Hmm, why 1200? If they are $1 dollar strike, the stock is at 12, and you have 10 of the options, that's 1000 shares at 12 bux per share on exercise, it would be about $12K, no?