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I don't know if the rules have been changed, but on expiration and option that is
1/4 point in the money is automatically exercised unless specific orders are given
by the owner not to exercise. Also beware of options that expire 1/8 or a 1/4 out
of the money the holders can exercise any long option as long as they pay for the
stock. I remember when options used to expire at 12:00 noon. Levi closed at 42
and all those worthless 45 calls were expired. Wrong. At 12:20 they stopped trading
the stock. At 12:40 Levi made an announcement and at 12:50 the stock opened up at
47. All those worthless options were now in the money and could be exercised until
noon on Saturday. So watch out for announcement after the close, they could bury
you. Fortunately, that time I had taken in all my shorts. Ira
THE DOCTOR wrote:
> Nope it is not true. A long cannot be forced to early exercise or even be
> forced to exercise an ITM on expiration. THE OCC rule about automatic exercise
> at expiration is waived if the long notifies their broker.
>
> David Donhoff wrote:
>
> > AAAAHhhhhhh.... HERE is the misconception which is absolutely untrue; that
> > you can't "be forced to exercise a long option position."
> >
> > The catch is whether the option is In-The-Money or not. If it is, it can be
> > randomly exercised... even if you are long! The reason, ostensibly, is that
> > since these are illiquid relative to ATM options, the individuals on the
> > floor will sometimes want to "close" the open positions in their accounts to
> > avoid surprises going into expiration. The exchange rules have been set up
> > to allow this to happen. Granted, this type of exercise is more rare, and
> > the key is how FAR ITM your option is... but it does happen without anybody
> > screwing up.
> >
> > I agree, it IS strange.... but definitely true!
> > Any floor traders out there want to corroborate this with Exchange chapter &
> > verse? (Calling DrOEX?)
> >
> > Big Profits to you,
> > Dave Donhoff
> >
> > PS. there were no short Puts involved... obviously.
> >
> > -----Original Message-----
> > From: steven poser <swp@xxxxxxxxxx>
> > To: deltaforce@xxxxxxxxxxxxx <deltaforce@xxxxxxxxxxxxx>
> > Date: Friday, August 28, 1998 4:20 AM
> > Subject: Re: LCOS Bull-Debit Spread answers
> >
> > >David - There had to have been a short put in that strategy somewhere
> > >for you to get put with stock, even if the net position was long. Nobody
> > >can force you to excercise a long position in options EXCEPT that the
> > >exchanges automatically exercise open options positions that are in the
> > >money at expiry. If you have ever been exercised otherwise, somebody
> > >messed up.
> > >
> > >Steve
> > >
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