Quote from jumper:
not sure if it was quah or someone else that brought up the issue of being assigned but it is my understanding that you can only be assigned when you are short the options. the long side is exercised.
Correct. Developer17 was long. The exchange auto-exercised him. And the underylying stock he now owned opened gap down. And he never had the money to own a quarter million worth of GOOG so IB liquidated him as soon as they noticed what had happened, then raided his other IB account for the balance of the loss (this is the only part I question the legality of).
I too am grateful to Developer17 for sharing this lesson, so all of us don't risk losing $10,000, because we didn't understand what can go wrong on the long side, if we don't click the magic button on IB's TWS.
What would have happened in this same scenario if Developer17 had sold the call? Would the options exchange have auto-assigned him? And he would have accidentally made $10,000? And if he had bought the put... an auto-exercise for the $10,000 accidental profit when the gap down hit on Monday? In both these situations would IB have auto-liquidated him too?
EDIT: OK, I am thinking that there is no such thing as "auto assign". In my above question there is no right that you or the exchange has to accept an assigment. There is only the option to exercise. However, exchange or not, you could GET assigned. And the other post says there are margin requirements to short (sell) the call and developer17 only had $2500 in his account.
However, I still wonder about buying the put and accidentally making $10,000. Maybe that can't happen either because there was no profit in that position on that Friday.
OK, here is the scenario, what if the opposite had happened, he bought the put, there was a slight profit in it on Friday, the options exchange auto-exercised, then GOOG was gap-UP on Monday, then he would accidentally make $10,000.
