I always wondered, when an option is exercised by a buyer, the person on the other side is picked how ? Is there a process? is it random or is it the original person that sold it to him, if so does that mean the exchange has to keep track of that very specific buyer and seller?? What if the seller closed out his position but the buyer held on? If this is the case isnt that too tedious for the exchange to keep track of whos who?
I've wondered this myself, and you inspired me to Google it. tl;dr: At the CBOE, the counterparty is selected either randomly or FIFO: http://www.cboe.com/learncenter/pdf/understanding.pdf
Wow interesting, random Is the last i thought it would be, typically those that exercise leave no room For error or money on the table but ive seen scenarios where its not and the seller gets a semi guaranteed profit, of course its by sheer luck And rarely Happens but does happen