Free money scam for dealers to end...5 cent trigger soon

Discussion in 'Options' started by stock777, Oct 3, 2006.

  1. I complained some YEARS ago that the 50 cent trigger was a joke and a scam. It was defended by the usual apologists.

    Not sure why the radical change this time , maybe they want fewer surprises on Monday morning.

    No more free 20 cent gains for short option holders.

    Then again , maybe they will game this nickle to get option holders to eat stock, at the last minute.


    Beginning October 2006, the Options Clearing Corporation (OCC) will implement a change to reduce the automatic exercise threshold for equity options. The current threshold of $0.25 will be set at $0.05 for expiring options that are automatically exercised by the OCC. The threshold for index options will remain at $0.01.

    This means that if you had an options position in company ABC and the underlying stock closed at least 5 cents above or below the strike price of your option (depending on if it is a call or put) on the Friday before expiration, your contracts would automatically exercise. The resulting stock position from the exercise would appear in your account the following Monday.
  2. Htrader

    Htrader Guest

    I actually think more people might end up getting screwed with this rule.

    Since stocks have a tendency to pin at their strikes on expiration, I suspect alot of people will get forget to close out or manually cancel the exercise on their at-the-money options.

    I can just imagine all the goog put/call holders who get inadvertently exercised only to have the stock gap 3 points against them on monday.
  3. Opra


    I thought options holder has "the right, but not the obligation", to buy/sell the underlying at strike.

    Shouldn't it be that contracts will NOT be exercised, unless the holders notify their brokers?
  4. lol, yeah, there will be some bedlam for sure when this goes into effect.
  5. Of course! <b>Nobody</b> benefits from <b>forcing</b> $0.05 ITM option holders to exercise. Nobody!

    What a stupid rule change.
  6. Actually we can game this no?
  7. Actually, I was gaming the shit out of it, every exp. Friday, under the old rule. Now? I repeat: With forced exercise, absolutely <b>nobody</b> benefits. If there was a way to game this, I'd have already thought of it.
  8. There's always a way to game something like this. Depends who you are and what you are trying to accomplish. And how much firepower you have at the bell.