What is options exercise?
An equity options buyer/holder has the right but not the obligation to exercise an option contract at any time before expiration. When you exercise a long call, you choose to take delivery of the underlying asset at the strike price. When you exercise a long put, you choose to sell the underlying asset at the strike price. Only option buyers have the right to exercise.
Most equity option contracts can be exercised any time from trade date to expiration date.
When an equity contract is exercised online, the stock is immediately deposited or removed from your account. Index options funds are updated the following business day.
You must have sufficient cash or buying power in your account to voluntarily exercise option contracts.
It is our policy to automatically exercise all long equity options positions that are at least $0.25 in-the-money, based on the "composite" or "consolidated" closing or last sale price reported by the Options Clearing Corporation (OCC) price vendors for underlying security prices on the final trading day prior to options expiration. To exercise equity options outside this parameter or to submit a request to decline an exercise of options within this parameter, please notify an Ameritrade representative of your exercise instructions. Your request must be received by us prior to 4:30 p.m. ET on the last trading day for the options contracts. If you do not have sufficient cash, positions, or buying power to cover any possible exercises or assignments, please wire in the necessary funds or close your position prior to the close of market on the last trading day prior to expiration. Please be aware that market conditions could dictate a forcible sellout in your account at any time, with or without notification, regardless of your intent to cover the amount due. Please call us at 800-669-3900 if you have any questions.
Most index options are European style. They can only be exercised at expiration. All in-the-money index options are automatically exercised upon expiration. Unlike exercising equity options, index options are settled with cash.
The last day to enter exercise instructions for American style index options is the Friday prior to expiration by 4 p.m. ET. At all other times, online exercise instructions for American style index options may only be entered between 8 a.m. and 3 p.m. ET. If you wish to submit exercise instructions at any other time, please call a Client Services representative at 800-669-3900.
You may submit a request to exercise long positions held in your account online by following the steps below. To exercise an option with odd or multiple deliverables, please contact an Ameritrade Trading representative.
Please note: On expiration day, all long equity options positions that are in-the-money by 0.25 of a point or more will be automatically exercised. All in-the-money index options will be automatically exercised on the day of expiration. Ameritrade does not accept exercise instructions via e-mail.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Please read Characteristics and Risks of Standardized Options carefully before investing in options.
Thanks for your reply. I think many who thought the 280 call would expire worthless because of the pps below 280.25 (until that 280.30 print if I'm not mistaken; and the 0 bid, may find out Monday morning that they now own shares. It's happened to me before on a stock. And I've seen those small .30 spiked prints on OE day before. Actually, they occur often on other days...but, I'm wondering if they occur 100% on OE day. Meaning: if a call is just pennies out of the money at close, is it a done deal that a trade will print at at least .25 above the strike price in order for those calls to be excercised.
all the trouble happened the last 6 minutes.
Some, I don't know how many, got shocked and didn't have time to close it. Thousands contracts?
I guess must be a lot. So this time the impact is quite different than usual.
Can't imagine at all!
No predictable effect, but the options-related trading on Monday post OE does account for higher-than-average volatility.
Every month lots of buying and selling goes on in response to options expiration. This month is no different, really -- except for the fact that there are a relatively small number of clueless people who will be surprised by what happens to them on Monday.