Hi folks, I've got a question on how short OTM options are credited. Are they automatic or do I still have to explicitely buy the options back to close them out? About 3-weeks ago I shorted a lot of Aug-06 260-calls on corn and they expired 7/21 just out of the money. My statement Friday night still shows a short position. So what should I do Monday? Buy back those calls or call the broker?
You shouldn't have to do anything. If the option was exercised by the purchasor (which is possible if it was "just" out of the money), then you will be long/short a contract (put/call). Generally, it takes a little bit after expiration for option assignment to be settled (IB usually takes until Sunday afternoon to get me a statement after equity option expiration, so I'd assume a similar situation exists with futures)
Ok, looks like I'm safe. Corn closed at 237 , so I won't be exercised. I'll wait for it to post soon. Thanks
Who's your broker? What commissions are you paying on the floor options? What kind of margin are short corn options using?
I'm using PFG and commissions are $25/roundturn. But they ended up nickel & diming me misc. fees up to about $32. Seems the best I could find for my small start-up account of $3000. Options in the account isn't marginable, so I've got to have all cash available for long positions. Interesting thing comes in setting up spreads, I only have to have cash to cover the difference in the premiums even though the credit from the short position isn't considered cash in the account until the short position is closed out.
That's not super. Try RJ O'Brien (through Tradestation, or directly). I believe they have a $5k opening minimum, will do SPAN margining, and have a $7/pit traded option trade (each way).
Thanks for the suggestion. I was planning on moving my account once I built up enough capital to qualify for the more inexpensive outfits. Who's got the best rates for $10k, 50k, 100k accounts? I'm strictly doing options for now to limit my losses. I'm not so active that the commissions will eat into my gains, maybe 3-4 trades a week. I'm close to $5k now, so maybe I'll jump ship next week. PFG's got really slow executions and their software's buggy; not showing current pricing correctly (either that or they're really squeezing me on the spread & slippage).
www.interactivebrokers.com is reasonably competitive, plus you get credit interest (on the balance over $10K) and SIPC protection on funds that are not being used for margin, and can trade international, ForEx spot, stocks, options, etc. all from the same account.
Quote from FullyArticulate: IB does not do floor-traded futures options (except a tiny subset). Yup. Sorry. I thought the CBOT FOPs were trading. They are in the process of adding more floor-traded products over time. Products traded by exchange are listed at: http://www.interactivebrokers.com/en/trading/products.php?ib_entity=llc