<p>And… You arent supposed to talk about the case, are you?</p>
<p>Any details - I haven’t really said anything that is material to the case.</p>
<p>Actually in every case, there is detailed testimony about the past. If I was in court testifying, I’d probably have to say I don’t remember almost all the time.</p>
<p>Ok… When I was on a jury I cant remember what i was allowed to say. :).</p>
<p>I expect some volume spikes in some spy options on Thursday. Maybe Wed as the etf goes ex dividend on Friday.</p>
<p>dstark,
I never pay attention to dividend on options unless I own the stock myself. Somehow, Scottrade always do something if it’s in the money, I never knew we could tell them to exercise or not exercise. That is something new I learned here.</p>
<p>Have you ever been long calls in a stock
That went ex div and you did not exercise?</p>
<p>I am not talking about stock with dividends of 2 cents, Something substantial.</p>
<p>No, I don’t believe I ever have that’s why what you described in one post sounds complicated.</p>
<p>Ok…</p>
<p>Here’s something new I found – as of next February, the CBOE is going to end the fiction of Saturday-expiration on monthly options:
See: <a href=“The Options Institute | Cboe Options Institute”>The Options Institute | Cboe Options Institute;
<p>I found the above when trying to find the answer to time-of-day for exercising (from post #9677). I think any deadline before market close is something determined by the broker:
[quote]
An investor with a long equity call or put position may exercise that contract at any time before the contract expires, up to and including the Friday before its expiration. To do so, the investor must notify his brokerage firm of intent to exercise in a manner, and by the deadline specified by that particular firm.<a href=“same%20link%20as%20before:%20%20http://www.cboe.com/LearnCenter/Concepts/Beyond/expiration.aspx”>/quote</a></p>
<p>I also think… but have not confirmed … that the number that determines whether an option is automatically exercised or expires worthless, is the closing trade on the last trading day prior to expiration - and doesn’t include anything that occurs after-hours. </p>
<p>I don’t believe that is true. I know that spy options expiration is either 4:15 or 4:30</p>
<p>Good point about dividends and option exercise from that page a the CBOE page I am reading (same link as above):</p>
<p>
</p>
<p>calmom, that makes absolutely a lot of sense.</p>
<p>Ok… Good link. Looks like brokerage firms do have some discretion.</p>
<p>Now my memory is failing me. I think Schwab told me last year that they do look at after hours quotes. I think. </p>
<p>Also Schwab has a deadline of 2:00 for a trader to decide to exercise or not. Maybe 2:30 on the third friday only.</p>
<p>Doct is right that spy keeps trading as do other stocks after the “official close”. </p>
<p>So… The question is… Who is responsible for the exercising decision?</p>
<p>Post 9692 is where the dividend trades come in…</p>
<p>OK, I think I found the answer- it’s a little confusing and I assume will change after the new rules go into effect for monthly options after February 15, 2015. </p>
<p>There are two kinds of “exercise” - automatic, and client-initiated.</p>
<p>An automatic exercise is made based on the price as of market close on the last Friday before Saturday expiration. Typically all options that are .01 in-the-money will be exercised, but some brokerages might set a higher amount for auto-exercise, and the client can also instruct the brokerage to set a different threshold or to refrain from automatic exercise for their account. </p>
<p>But the human being who holds the option can exercise at any time up until the option closes, which is noon on Saturday for monthly options – subject to whatever process the broker sets for giving such notice. Since stock brokerage firms generally are not open on weekends, as a practical matter that probably means that the client must instruct the broker at some point during the broker’s business hours on Friday. So if an option is OTM as of market close on Friday, but moves ITM during after-hours trading - it can be exercised, but it does not appear that it would be auto-exercised, at least not for the ordinary retail investor. (I’d assume that the big players have more flexibility as to how and when they can exercise). </p>
<p>So I think the answer for us ordinary folks is:</p>
<ol>
<li><p>If you are holding a long option that is ITM, it will be auto-exercised by your broker based on the Friday closing price. If your option is OTM, but you think it is going to go ITM based on post-close market conditions (such as an earnings report released after market close) – then you’ll need to call your broker-- and find out from your broker what their deadine is. It may be only 15 or 30 minutes after market close. </p></li>
<li><p>If you are holding a short position that is OTM as of market close, but goes ITM with after-hours trading on Friday, there is a possibility but not a certainty of assignment, but you’ll only find out on Monday. Some of those options will still expire worthless because they are held by investors like who don’t choose to take action based on after-hours trading, and some will be exercised. Keep in mind that it is possible for an ATM or OTM option to be exercised – it just doesn’t happen automatically. </p></li>
</ol>
<p>Anyway, that’s my interpretation of information in these articles:
<a href=“Options Expiration - Options Don't Expire on Fridays | InvestorPlace”>http://investorplace.com/2010/02/options-expiration-options-dont-expire-on-friday/</a></p>
<p>Scottrade Explanation:
<a href=“http://research.scottrade.com/knowledgecenter/Public/Education/Article?docid=055c7c64cd904eb5b950ff4435f4fdfb”>http://research.scottrade.com/knowledgecenter/Public/Education/Article?docid=055c7c64cd904eb5b950ff4435f4fdfb</a></p>
<p>Options House policy:
<a href=“https://www.optionshouse.com/faq/exercises-assignments/are-all-in-the-money-options-automatically-exercised/”>https://www.optionshouse.com/faq/exercises-assignments/are-all-in-the-money-options-automatically-exercised/</a>
</p>
<p>I’d add that from what I’ve read in terms of advice to traders, the holder of a long option is usually better off financially to close their option rather than exercise – that may only apply to retail investors like us. So if you are holding a long option that is ITM, closing it close to expiration might be a better choice. That’s probably due to factors like the remaining time value, however small, on the option that you recoup with a sale, and the fact that brokers typically charge a higher commission for exercise than they do for a trade.</p>
<p>An exception might be where the stock is going ex-dividend early in following week (so you can pick up a near-term dividend with the exercise). </p>
<p>I’ve always close mine before the expiration date. I’m playing with big money like $18 per share per option, i.e. not .02cents per share. When the option lost most of it’s value down to less than $1, I usually close it. I literally made $17/18, almost 90%, I’m not going to complain.</p>
<p>Reading these posts, I realize that Schwab just raised their rates on exercises and assignments. The costs of exercises and assugnments used to be. $8.95. Now it is $8.95 plus .75 cents a contract plus exchange or sec fees which are tiny. </p>
<p>That .75 a contract is annoying and costly.</p>