Going Through Call Option Expiration

R

Randy888

Hi All,

So I've started trading options a week ago lol
Had market manipulated by WSJ, (Fake news released on the close of call options/expiration time), filled out a SEC complaint & got a margin call..
& this is my question:
what happens when a call option(open to buy) expires and when exactly in time does it expire?

I had a call option(open to buy) which was closed automatically by the trading platform. which to me at that time seemed very strange, because I read that you don't risk anything by buying a call option. And in the end if your out of the money you don't exercise it if you are in the money you just magically get money..

so my trading platform warned me @ 18:00 GTM that the option is expiring, then I received a few margin call warnings and it has close the position.

do all trading platforms demand that you have enough $ to buy the stock at the strike price when the expiration happens? do all of them exercise this option ~2pm or 18:00 GTM ?

how do you trade call option when you have few hours before "official" expiration date. I read somewhere that the expiration happens ~5:30 pm..

It seems that on the expiration day, when there is like 1h before close. If ur buying a call option you must have enough $ to buy 100 shares(exercise the option).. :/

I'm using this platform called saxoTraderGo..
Apologies for the amateur question.

P.S. say we buy a 5 day call option, the max option price should theoretically be ~Wednesday? in the middle of that period?
 
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If your call is in the money even 1 penny, the broker will exercise it meaning you have to have the monies to pay for the call option. On option expiration day, if your call is in the money, you should sell to close it. You would then, not be required to buy the stock. Of course, you can choose to close your option position anytime before the expiration day.
 
Glad u liked it.
What i dont get us why on the expiration day. My broker slams a margin on my option and says: dude you need this margin in your acc to keep the option going or we close it @ 2pm. I mean what if just want it to expire and do nothing in that case option expires i lose some cash & there is no need for margin...
 
Randy888 said:
Glad u liked it.
What i dont get us why on the expiration day. My broker slams a margin on my option and says: dude you need this margin in your acc to keep the option going or we close it @ 2pm. I mean what if just want it to expire and do nothing in that case option expires i lose some cash & there is no need for margin...
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Because the broker is thinking about the other case; what if it expires in the money by 4PM and you don't have the cash to cover it, and then the stock gaps over the weekend, putting you in debt you can't pay and them at a loss?
 
I think your question about ITM long options is a good one. I've read that the "exercise by exception" or "automatic exercise" rules pertaining to ITM long options are for the convenience of brokers who don't want to make decisions about individual accounts on a case-by-case basis, and I've also read that these rules are for the benefit of busy or distracted traders who might not be aware that their expiring long options are in the money, but it seems that a rule allowing such ITM long options to expire unexercised would be just as convenient for the brokers, and isn't it up to the trader to be alert if he/she doesn't want such ITM long options to expire unexercised? Could it be that these rules have been adopted because they generate commission income for the brokers?
 
I'm extremely unsatisfied with these rules. Ok say ur in the money/out if the money who cares.. if you dont have enouhh $$ to exercise, the let the option to expire.. why the hell to force close it if you could exercise it 1h later and still have 1h to got before trading day close. This is just for silly benefit of the trader.
 
Randy888 said:
Hi All,

So I've started trading options a week ago lol
Had market manipulated by WSJ, (Fake news released on the close of call options/expiration time), filled out a SEC complaint & got a margin call..
More...

This is funny. You have been trading for a week and are already blaming your losses on boogiemen.

Randy888 said:
I'm extremely unsatisfied with these rules. Ok say ur in the money/out if the money who cares.. if you dont have enouhh $$ to exercise, the let the option to expire.. why the hell to force close it if you could exercise it 1h later and still have 1h to got before trading day close. This is just for silly benefit of the trader.
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You should review the OCC paperwork you signed.

http://www.cboe.com/education/getting-started/quick-facts/expiration-exercise-assignment

The CBOE has a quick sheet for you. The relevant section is as follows:

What is "automatic exercise" of an option?
The Options Clearing Corporation has provisions for the automatic exercise of certain in-the-money options at expiration, a procedure also referred to as "exercise by exception." Generally, OCC will automatically exercise any expiring equity call or put in a customer account that is $0.01 or more in-the-money, and an index option that is $0.01 or more in-the-money. However, a specific brokerage firm's threshold for such automatic exercise may or may not be the same as OCC's.
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These are the rules of the game. In other words they will force you to meet margin or close it due to this rule. Moneyness matters here. Since we are talking about expiration, the type of expiration you are referring to only deals with ITM options. You are responsible for closing your contracts before expiration. The only people who carry them to expiration ITM are people who have an intention to exercise (for long options).

Why would you carry an ITM option to expiration only to not exercise it? Exercise allows you to achieve your maximum profit assuming the equity goes to the moon (call) or falls through the floor (put).

Or on the contrary (related to getting margin called), imagine you allow someone to carry an ITM short option to expiration and then they call your options desk and say "I dont have enough money to cover this trade, help me". The OCC is looking out for themselves here - as they should.


I would recommend you stop trading options for now and pick up a few books on the subject. Options are very complicated instruments and you need to understand all the rules of the game before playing.
 
Dooly noted and will be considered on a later date.
what if the boogyman were out there to get us?!
Funny how you absolutelly incorectly assume stuff lol.
One can only prove that they do not exist by proving that 》1k ways it was not a buggy man. Science way bro. Science.

Will cosider some wiki posts buy I already know more than it is needed.

So now u tell me do you have algorytms that trade for you? Or should i suggest for u to read a few books..

Kufos for quoted info.
 
But the question is not about in the money short options. It is about in the money long options, which give the holder the right but not the obligation to exercise. There are good reasons why the holder might not wish to exercise an in the money long option at any time prior to expiration, and he/she actually has no obligation to do so. (I might hold an option to buy your house by tomorrow, but I am under no obligation to do so, even if just prior to expiration I could buy your house below market value.) The brokers have simply decided that they will behave as though the holder does have such an obligation. The question is why the brokers haven't decided to let unexercised in the money long options expire, but as I said, there is commission income at stake here.
 
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