They put a sell on my option contracts at .02 apparently to collect their piddly commission moments before the price of the options soared to .14 as I knew they would.
Option House just closed my position 30 min before it became profitable ON A >>>CASH<<< ONLY ACCOUNT
- Thread starter VanishingMediator
- Start date
Could you please provide details and evidence of the time all this took place?
Their site is quite clear on what will happen, and it is not their responsibility to manage your trade.
https://www.optionshouse.com/faq/ex...in-the-money-options-automatically-exercised/
Edit: Made an assumption while watching the Ryder Cup, my mistake. You said they sold an open position on a cash account, so no margin issues. Details and evidence please.
Their site is quite clear on what will happen, and it is not their responsibility to manage your trade.
https://www.optionshouse.com/faq/ex...in-the-money-options-automatically-exercised/
Edit: Made an assumption while watching the Ryder Cup, my mistake. You said they sold an open position on a cash account, so no margin issues. Details and evidence please.
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They sold them because of the risk the options might expire ITM and you did not have the funds to buy the shares.
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Update, I Just got off the phone with some moron who admitted they sold the position and blatantly argued with me about it and then hung up on me. I have traded options on >CASH< accounts up until 4:00 on expiration day many many times on other brokers. This joker claims it was because of the risk of auto exercising - however A) The options eventually expired worthless - they could have simply waited until 3:59 to do the same thing if it was really necessary (it isn't) B) Even if they were in the money the options could simply have been flagged to not auto exercise or C) The resulting stock could have been immediately sold for profit.
Selling the options immediately before the trade becomes profitable is not only an idiotic course of action that completely contradicts the services advertised by optionhouse, it smacks of broker-market maker collusion.
Selling the options immediately before the trade becomes profitable is not only an idiotic course of action that completely contradicts the services advertised by optionhouse, it smacks of broker-market maker collusion.
On the off chance you are really looking for a reply instead of just ranting,
A) Where the option expired is not relevant. There was a risk that it would have been in the money and be auto exercised in an account with not enough money to pay for the stock. You say they could have waited until 3:59 to see, but this isn't really practical. You aren't their only customer, they simply can't do this for every customer in your position in the last minute of trading.
B) Filing a contra exercise form for you if they expire in the money would create other problems. I can hear you saying, "these options were worth 2 and the let them expire worthless" Better for them to deal with the problem in advance.
C) You say that stock could have been immediately sold for a profit. No, that's not true. You would get the stock on Monday, and it could be a lot lower.
This issue could be fixed if you traded cash settled indexes where there is no risk of stock being assigned to you.
A) Where the option expired is not relevant. There was a risk that it would have been in the money and be auto exercised in an account with not enough money to pay for the stock. You say they could have waited until 3:59 to see, but this isn't really practical. You aren't their only customer, they simply can't do this for every customer in your position in the last minute of trading.
B) Filing a contra exercise form for you if they expire in the money would create other problems. I can hear you saying, "these options were worth 2 and the let them expire worthless" Better for them to deal with the problem in advance.
C) You say that stock could have been immediately sold for a profit. No, that's not true. You would get the stock on Monday, and it could be a lot lower.
This issue could be fixed if you traded cash settled indexes where there is no risk of stock being assigned to you.
I think a number of replies are "blaming the victim". I agree with the OP its a crappy thing to do...It makes me think the broker is so small and short of funds its actually worried about being "stuck"???Seriously...with that action and crappy service I would switch brokers asap. even IB doesn't prematurely liquidate.
OH is simply not going to take the risk. Ironically, you have less funds available should the thing be auto-ex, which they cannot allow. As FSU stated; you cannot tell them when to do it. They're going to wait until the last possible minute and then execute potentially thousands of order simultaneously?
Right, they're going to exercise for you and then sell the resulting shares at a profit; all on a not-held basis. What universe do you live in?
Many brokers (could be reg-rules, dunno) have a short prem to portfolio ratio that is something like 30x for risk-positions (non-locks/arbs). I've received notices on boxes and rolls that I've exceed the 30x ratio. Nothing happens, but the potential is for a blowout if their computers were to go to mkt. understand the risks of trading. The ones you don't see are the ones that will tear you up.
A single near the strike and on LTD is nothing but risk for the broker. It's less risk to be short the option as you would have to maintain a haircut.
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Oldie but classic thread on the risk of holding OTM calls on expiry day. Once you read it I'm sure you will be more aware of your positions on expiry day.
Margin Call on an IB IRA account
Margin Call on an IB IRA account
Cash account matters. He can't take delivery and funds must settle. OH can't hold positions in street name for a cash account.