Quote from FSU:
The OEX is really a unique animal. Not traded much these days, but if you are short options, it can be very risky.
Lets say you are long a 660 call. The index closes at 3:00ct at 680. During the day your call may trade with a small premium over the index value. At 3:00 it is always worth at least 20 (with the index at 680). OEX options are hedged with S&P futures (or SPY). So at 3:05, say the futures drop 10 points. During the day the call would also drop in price, but now it can't. The market maker can still effectively "sell" this call for 20 (by exercising) and buy the futures much lower, (even though the call is really "worth" much less.)
With and equity, this wouldn't be a big deal as if you were assigned, you would get stock. Here, since the index is cash settled, you are forced to "buy' the call for 20. This is one reason boxes in the OEX are worth a lot.
If you wish to exercise these options, the OCC must be notified before 320 ct. You can also find out the percent of each series that are assigned every day by about 6:30pm. Unlike other options, here you will be assigned the same percentage of your holdings as the entire open interest is assigned.
This also opens some opportunities as well. Since many customers must notify their clearing firms well before this deadline, their long positions may not be exercised, even if they should be. What a customer may do is "sell" an option to open and hope to skate the assignment. In the past example, the calls are worth 20 as that is parity. The should really be trading at say 15. If you offered these calls at 19.90 a market maker would buy them to make the sure .10, but if any skate through, you could make 4.90.
