for the options experts out there... i've got some sep. ITM puts on an equity in an illiquid (options) market, with an insanely wide spread. the equity itself trades tight with volume. HOWEVER...the stock is on the reg SHO list. my question (in general, more than my specific broker): can i do something which says "convert the puts to stock and cover instantly at the current stock price?" i don't care about not being able to hold them longer when expiration comes; i just want to know whether i can do it to avoid the wide options spread, or whether i should start piecing it out slowly on tues-thursday. i do not have huge volume on them. thanks.
Your broker should be able to exercise the options immediately and then cover the stock. But if you're worried about the price of the stock changing over the several minutes that this may take, you may want to go long the appropriate amount of stock to lock in your profit. The broker can then exercise the options and then "flatten" the short and long stock positions, usually with no added commission.
thanks for the info.; i'll check in advance and make sure my broker can do it, just wanted to make sure it was a not-uncommon (and acceptable!) practice. thanks.
If the put's bid includes some time premium, sell the put to close. If the put's bid is going for less than intrinsic value, buy the stock and exercise immediately to exit for intrinsic. Your commissions also need to be considered to determine which of the above is better.