It would be better if they called you and explained everything, but they are a discount broker and they did notify you. They have no authority to exercise it on your behalf and should not have done so.
Oh, this stock halt is every option sellers' dream (If you have sold short options for premium before the halt of course). Time decay with no price movement and no volatility, just time decay. It might not be fair, but this is how the market operates, so guess for option buyers, halts might be a significant unforeseen risk.
No. It’s the worst. You have no control what your position will be and at what price you can unwind it at. Stocks don’t halt for a few days and not have a significant volatility event that will dwarf the free theta earned over those days.
Agree, only if you are short long dated options where it's almost certain the stock will be back before they expire. For the free theta, you forfeit position control. I agree that volatility is expected after a halt, which would hurt your short option position, but there is also the direction after the halt is over, which can work for you or against you.
This is an incorrection assumption( as in wet dream) that a a high commission broker would have acted any differently.
Their was someone here not long ago talking about being stuck in a short position from a halted company. Sounded like a nightmare in borrow fees, you can be stuck for some time depending on what halt was for, especially if it gets delisted. I think I’d be happy that IB didn’t exercise and would be weary if shorting junk that’s going to go bankrupt, delisted, etc.
That makes a lot of sense. Thanks for answering my questions. So what will be the worst case if someone has short position and the stock halts and never comes back?
It’s best to stay out of markets that are broken unless you have an informed or advantaged view about that broken market: like oil right now.