TDA...Look what I found in the bowels of the disclosures

Discussion in 'Order Execution' started by Cabin111, May 24, 2023.

  1. Cabin111

    Cabin111

    Was just skimming through the fine print at TDA. I came across this section about automatic fills for option expiration. It may not be automatic...

    I am responsible for instructing you as to my intention to exercise
    options contracts before the expiration date. Absent proper and timely
    exercise instructions from me, you have no obligation to exercise any
    right, privilege or obligation of any option for my Account. I agree that
    my failure to provide you with proper and timely instructions may result in
    the option expiring worthless, even though it may have a monetary value
    on the expiration date. I agree to read carefully the Margin Handbook for
    additional terms and important information regarding options exercise.
     
    zdreg likes this.
  2. zdreg

    zdreg

    What about on the expiration date? Is it automatically exercise if in the money unless you opt out?
     
  3. Cabin111

    Cabin111

    I don't know...I just noticed (and focused) on the automatic exercise.

    It just seems that you MUST give notice to allow an option to execute...

    PS For me, if it was a large trade, I would want a hard copy of my choice to execute!!
     
  4. TheDawn

    TheDawn

    Where do you see that? That is so wrong as it is in complete contradiction to Option Exercise rules by the OCC which states that any option that is ITM of at least by $0.01 is automatically exercised in the absence of any explicit instructions from the option holder. If the option holder does not wish to exercise its options even it's ITM, then it actually needs to provide explicit instruction for the broker not to exercise the option.

    TD even states this on its ThinkOrSwim instruction website: https://tlc.thinkorswim.com/center/...ly exercise,of the option instructs otherwise.

    "Automated-Exercise
    The Options Clearing Corporation (OCC) uses this procedure to exercise in-the-money options at expiration. Doing so protects the owner of the option from losing the intrinsic value of the option because of the owner's failure to exercise. Unless instructed not to do so by the owner of the option (through the owner's broker), The Options Clearing Corporation will exercise all expiring equity options that are held in client accounts if they are in-the-money by .01 or more. TD Ameritrade will automatically exercise an option position if it is .01 or greater in-the-money at expiration unless the owner of the option instructs otherwise."
     
  5. Cabin111

    Cabin111


    It says 2022, so it may be current. You decide...

    https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwi_7fi1gPb-AhX5HEQIHY3KCp8QFnoECBwQAQ&url=https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD182.pdf&usg=AOvVaw3hXWwrw15KPwuQgltkpYow

    Under "options trading"...

    If I was the broker I would put it the same language, just in case something went sideways. I could say: "look, right here in the fine print"...

    PS You are dealing with Canada and also Schwab. I don't know it that comes into play...
     
    Last edited: May 24, 2023
  6. zdreg

    zdreg

    They can say whatever they want but they are bluffing.
     
    TheDawn likes this.
  7. TheDawn

    TheDawn

    They can say whatever they want but if it's in contrary to OCC rules about the automatic exercising of options which are set by FINRA and SEC btw, not by OCC itself, then that clause is invalid. If TD doesn't exercise your options when it's supposed to, I am sorry it will be their a$$ on the line. You can totally sue them or complain about them to SEC and FINRA if you suffered any losses and SEC and FINRA will be dealing with them.

    Has nothing to do with Canada. TD is in the US and it's US rules and laws that they need to comply with. They even state it on their own website:

    "TD Ameritrade will automatically exercise an option position if it is .01 or greater in-the-money at expiration unless the owner of the option instructs otherwise."

    https://tlc.thinkorswim.com/center/...ly exercise,of the option instructs otherwise.
     
  8. Cabin111

    Cabin111

    Don't shoot the messenger!!

    I think you will need to think or swim on this one...
     
  9. TheDawn

    TheDawn

    Nah I think it's them who would need to think or swim on this one. LOL I don't know who they hired as their corporate lawyer but whoever that is, they need to fire him/her pronto. That lame disclaimer is not going to stand up in court at all.
     
  10. M.W.

    M.W.

    And you honestly believe your words/claims hold any weight for someone with a sizable in-the-money position? Show us they are bluffing. Otherwise your claim means nothing. A more valuable advice would have been for everyone to check with their brokers themselves to ensure there are no ambiguities.

     
    #10     May 24, 2023