When you exercise a long option, do you get stock instantly or end of day?

Discussion in 'Options' started by noob_trad3r, Feb 15, 2012.

  1. lets say you are short stock, long call. you decide to cover at the strike price. If you exercise your long call, will stock be delivered on the spot to make good on the covering of a short sale?

    or is it after hours during OCC processing?
  2. rmorse

    rmorse Sponsor

    I believe, when you send the instructions to exercise to your broker, the request gets submitted to margin. When margin enters the exercise, your considered long that stock to off set your positions. Settlement is next day. You'll have to ask your broker when the long is considered yours. Some brokers might not do the paperwork with the OCC until after the close.

    So, if you were flat stock, long calls ITM, and want to exercise and sell stock long, you might not be able to do that right after you send in the instructions.
  3. Thanks, that would make sense since OCC seems to process exercise requests at the close.
  4. rmorse

    rmorse Sponsor

    When I was a market maker, we were considered long the stock at the time we clocked the exercise ticket and called it in to margin. But that was a little different, it was not a customer account.
  5. spindr0


    Assinment/exercise occurs after the close. The + or - position will show up in the AM.
  6. you can test it in your paper account.

    I never short any either CALL or PUT. but I left some CALLs in the money to expire, the stocks was develivered next day, not instantly at the closing.

    normally I will clost out all my options before last minute expiration. the individual stocks consumes out lot of my capital.

    i have a question here, for example, I have a 100k account, I bought 1000 AAPL 490 call, and let it expire in the money, theoretically they will deliver AAPL stocks to me, but you know my account does not have so much fund, what happens?

    anyone try that?

  7. Your account would get liquidated to meet margin.
  8. FGBL07


    Here is an example of what might happen: http://www.elitetrader.com/vb/showthread.php?s=&threadid=51251
  9. You would have thought ib would see that he obviously had no capacity to meet margiin Under reg-t and they would have automatically sent a no exercise notification to the occ.

    I thought ib was supposed to have all these fancy automatic risk assessment bots.
  10. thats an old post, I imagine ib will liquidate the position before the close if you cant handle the assign.
    #10     Feb 19, 2012