Also if you intend on trading expiring options late in the day and don't have the margin to cover an exercise/assignment, I would suggest you trade cash settled indexes such as the SPX. Here you wont have to worry about late day liquidations.
no one is suggesting clearing firms take any risk and its not really about 'the price' versus an exchange. its slightly annoying to have to pay the clearing firm then citadel then whoever else in a completely opaque bilateral arrangement where they can do whatever they want..but whatever. the issue is more that there are serious problems for the clearing firm if they want to liquidate positions at random and hope not to cause serious problems. 80% of retail trades lose money though so
I just checked my statement. The exact time (i.e second) isn't indicated but a code says that both trades were executed on OTC as the "exchange". That spells trouble, eh?
You were likely liquidated as two single legs not a spread. After you do your trade, they are paired for margin but that is it. It would not be common to liquidate as a spread. They have to follow their WSP- a pre-set procedure that applies to all liquidations.
Hey Bob, I was hoping you would jump in on this thread. How come neither leg is listed in time and sales at the prices the OP stated (the 171's were at a slightly different price, but the 170.5's , not at all) and what the heck does OTC mean as an exchange. They trade has to be at least crossed on an exchange???
The OCC requires all listed options print on one of the 15 option exchanges. I do not have access to his trades or time and sales and would prefer not to look into the activity of another broker or ask him why he did not exit the position even though he was warned. The entire event does not make sense to me. Bob
Because the spread wasn't in the money, nor particularly close, I figured they'd just exercise the itm 171puts that I owned and that I'd in turn be assigned the itm 170.5's that I was short. I've had spreads go off fully itm before in the above stated fashion. In fact, several weeks ago I received this ambivalent reply from the firm about another itm put spread that I owned until opex. "If you have a spread about to expire: *If both legs are in the money, or not at risk of being in the money, we’ll take no action letting them either both expire or assign/exercise. *If one leg is at risk or in the money, we'll close the spread or match the option with another form of collateral (like cash or stocks) and let you exercise it." What rankles me is that I was in front of the screen (this wasn't my only position) and was minutes away from getting out on my own volition. BUT, I figured if the firm blows me out, it'll be at the same price I would anyway. Keep in mind, this spread was fully in the money with an hour to go, so it's not as if it were jumping around.
This all makes sense from a risk perspective, as there was no chance you were going to end up with a stock position that might cause a Margin call. I'm still guessing that you were not liquidated as a spread.
I'm guessing that the long 171's were blown out on the bid side of a 1.86-2.41 market in the outright and that the short 170's were bought on the 1.83 offer of a similarly wide spread. srinir's screenshot of the options chain shows that the spread was 10 cents bid (at .90, lol) Instead, I was filled at a differential of .03 Any idea why these two trades aren't on the tape? (yes, it's a U.S. firm)
Good question for your broker. https://www.theocc.com/components/docs/legal/rules_and_bylaws/occ_rules.pdf Chapter IV - Trade Reporting, Novation, and Confirmation RULE 401 - Reporting of Confirmed Trades and Novation1 (I do not claim to understand this, but trades have to be reported.)