I thought OCC auto exercizes options 1 cent ITM?

Discussion in 'Options' started by noob_trad3r, Sep 27, 2012.

  1. http://online.wsj.com/article/SB10000872396390443507204578020170395785566.html

    NEW YORK—A $10 million loss tied to stock options suffered by Bank of America BAC +2.38% Merrill Lynch last week renewed debate about an options-trading strategy that has been a source of controversy in the past.

    The loss stemmed from the Charlotte, N.C., bank failing to properly execute a so-called dividend trade, which some in the industry say is designed to profit off smaller investors who may be ignorant of its workings or poorly positioned to avoid coming out on the losing end.
     
  2. had to do with early exercising an option.

    Anyway, I think the OCC abandons options < 5 cents ITM.
     
  3. Oops yeah your right. Dividend capture opportunity occured before expiration day

    Last I read it was 1 penny it was changed from before.
     
  4. #1 - You would be wrong.
    #2 - Irrelevant.
     
  5. You are right. I remember it used to be a quarter. And then they changed it. I didn't realize it was a penny now. I thought they always kept some room.

    Seems dangerous as a lot of retail traders can get margined because of an odd closing print.