Annoyed with ameritrade option policy-venting

[spindr0]

Quote from piezoe:

"It takes more than that to roll it." That's self-evident isn't it?

You, in general do not want to exercise a long call that is well forward. If you need to cover your short calls with stock, you will most times be better off selling your long calls and using the proceeds to buy stock, rather than exercising. All let you do the math to prove to yourself that this is true.

If it's true that it's self evident than why state it incorrectly?

Who suggested exercising the long leg as a solution to a calendar that's ITM?

Try doing the math of what happens when you buy stock and it then drops significantly... unless, of course, you believe that "you will most times be better off" converting a losing calendar into a covered call.

 

[piezoe]

Perhaps you didn't understand my original post correctly. If i was unclear i apologize. No one suggested exercising the long option.

 

[dagnyt]

Quote from piezoe:

In my opinion, Ameritrade did not do him a disservice by requiring him to deal with the short option in some way well before the close.

You MUST be kidding.

An option owner has the right to exercise any time. He does not have the obligation to exit a position at the broker's convenience.

Anyone who tolerates that requirement is too unsophisticated to be trading options.

Mark

 

[spindr0]

Quote from dagnyt:

You MUST be kidding.

An option owner has the right to exercise any time. He does not have the obligation to exit a position at the broker's convenience. Anyone who tolerates that requirement is too unsophisticated to be trading options.

To be fair, as piezoe noted from the OP's conflicting posts, there is some question as to whether the he was long or short. Sometimes it's hard to tell the facts from the typoese

 

[johnnyc]

basically if you don't have the funds on hand to handle the assignment or exercise then you should be closing your position prior to the close.

 

[dagnyt]

Quote from johnnyc:

basically if you don't have the funds on hand to handle the assignment or exercise then you should be closing your position prior to the close.

Agree 100%.

But it's your right to be ignorant.
The broker should try to educate, not force a trade on its customers.

One assignment, followed by a margin call, is a good way to teach a customer a lesson. Not too expensive, and a good experience - not to be forgotten.

In addition, why force a close at noon/ why not 10 minutes prior to the close?

Mark

 

[spindr0]

Quote from dagnyt:

One assignment, followed by a margin call, is a good way to teach a customer a lesson. Not too expensive, and a good experience - not to be forgotten.

Black Monday in '87 taught me an invaluable lesson regarding margin and money management... though I would have liked a lower tuition.

 

[thebubs]

I my original post confused people let me try to clarify, try not to get too stuck on symantics:

I placed a calender call, ie sold the Sept 16 strike price call
bought the Oct 16 strike price call,
for a net cost to me of 22c per.

If my terms are incorrect; it is a run of the mill calender call when you place a calender call what are you doing, thats what I did. It seems people get so hung up on the exact words used that they do not see the forest for the trees, it was a celnder call which ameritrade wanted me to close (buy back) the front month by 12 noon, they did not adivse me of anything. They just said if you have an option that is 1c in the money at noon they have the right to close/buy/sell that option. They were by no means telling me I had to buy the shares or sell the back month- that would be up to me to determine obviously

 

[spindr0]

Quote from thebubs:

I my original post confused people let me try to clarify, try not to get too stuck on symantics

When you say SELL to close instead of BUY to close, it's not semantics.

Brokers have the right to have more stringent rules and requirements than the law permits. I'd check the fine print in your account agreement to see if that's the case with Ameritrade. If so, deal with it or go elsewhere.

 

[johnnyc]

Quote from dagnyt:

Agree 100%.

But it's your right to be ignorant.
The broker should try to educate, not force a trade on its customers.

One assignment, followed by a margin call, is a good way to teach a customer a lesson. Not too expensive, and a good experience - not to be forgotten.

In addition, why force a close at noon/ why not 10 minutes prior to the close?

Mark

yeah, just depends on the resulting position I would think. I would think if it's just going to be a margin call then they'd let it go and only close it out if there was significant risk of the account going upside down as a result of the exercise/assignment.

requiring a position to be closed at noon does seem pretty excessive. I would guess it just depends on how many accounts they have to review and they also probably have some gamblers putting positions on late in the day too. but I'm just guessing, not familiar with ameritrade's rules or policies.