ITM...When to call away the option

Discussion in 'Options' started by Cabin1111, Jun 18, 2025 at 4:14 PM.

  1. Cabin1111

    Cabin1111

    From AI if anyone cares...Not 100%

    What percent of early assignments options are made from human designed (preset) algorithms


    Determining the precise percentage of early assignment options made from human-designed algorithms is difficult. Here's why and what the information suggests:
    Factors Influencing the Decision:

    • Complexity of the Decision: The extent to which algorithms are used likely depends on the complexity and volume of the decision-making process. For instance, algorithmic trading is commonly used for Forex trading, with one study suggesting that algorithms perform around 92% of trades in that market. In options trading, early assignment decisions are often based on whether the option is in-the-money, the amount of time value remaining, and whether there's a pending dividend.

    • Industry and Context: The role of algorithms can vary significantly across industries. In some contexts, like manufacturing, automation is used to streamline tasks and improve efficiency. In others, such as healthcare, AI-driven scheduling tools leverage technologies like LLMs and LGMs for optimization.

    • Preference for Human or Algorithmic Decision-making: Research suggests a mixed public perception, with some preferring human decision-makers due to perceived fairness and trustworthiness, particularly in tasks requiring human skills. However, the efficiency, speed, and potential for reduced bias offered by algorithms are also recognized.
    Information from the Results:
    • General Automation: A study of human-AI systems found that over 95% involved humans making final decisions with AI input, but it also notes that decision-making tasks with predefined options are common in such systems (around 85%).

    • Trading Algorithms: Algorithmic trading is common, especially in high-frequency trading (HFT) where speed is crucial, and it's used by large financial institutions as well as private traders.

    • Early Assignment Specifics: In the context of options trading backtesting engines like QuantConnect, early assignment is simulated when an option is in-the-money to reflect the real-world possibility of early exercise. However, this simulation isn't always accurate, especially for index options, which are cash-settled.
    In summary: While algorithms play a significant role in various decision-making processes, including those in finance and trading, obtaining a specific percentage for early assignment options based on human-designed algorithms is not readily available in the provided results. The extent to which algorithms are used in this context likely depends on a variety of factors related to the specific trading platforms, strategies employed, and the preferences of individual traders.
     
  2. spy

    spy

    So the AI punted... you should have asked if it was alive instead.