SIVB/SBNY Option exercise problems

smallfil said:
Chances are good, the put buyer will just sell their options back to close their position, why would they exercise it? Of course, if they had SIVB stock, they would exercise it. There is always that risk and preferably, you have funds to cover the exercise. No, I do not have positions in SIVB stocks or options. Just giving my 2 cents.
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Yes always close do not exercise, BUT THAT IS NOT POSSIBLE HERE. There is no trading in the stock OR Options.
 
FSU said:
Both SIVB and SBNY have been halted. So, what happens if you have an options position, especially one the expires this Friday. Basically, is seems you are screwed.

The OCC has put out a memo that options can still be exercised, but if you don't have the corresponding stock most brokers seem to be blocking customers from exercising. Say you have a March 125 put in SIVB. The stock is worth very little if anything, but you may have to let it expire worthless. If you have a vertical put spread you could be really in trouble as your short may be assigned.

Even if your broker allows an exercise, you will have a massive margin requirement as you will be short shares as the last closing price and will have to pay hard to borrow fees.

The OCC has indicated they "may" offer a cash settlement sometime in the future, but no word yet.

Anyone here have a position in these options and what is your broker saying?

This just shows you could have a position you think is very safe and it turns out not to be.
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This is ridiculous. There is NO WAY that they do not offer you something, either in kind or in cash if you exercise your options. They are contractually obligated to do so otherwise they are in breach of contract. This is what people don't realize when they trade options. They are contracts and not just securities. When you are the seller of the options, you have contractual duties that you absolutely need to perform if the other party, the buyer invokes them by exercising their options.

The call options are dead in the water now so you wouldn't be exercising them now but put options are ITM especially now that the company doesn't exist anymore. Exercising your put options of SVB entitles you to open short positions on the company regardless whether the broker likes it or not; that's not their call. If short positions cannot be opened anymore, then you should be entitled to a cash settlement = (strike price - market price of the shares at the time of exercise) X number of contracts X 100. It's not a question of "may"; it's a "must" otherwise the option sellers who wrote these options are in breach of contract and are also committing securities fraud and if OCC or the broker don't assist in the exercising of these options, then they are accessories to the fact to securities fraud. This is major lawsuit and class-action lawsuit. I am sure OCC will come up with something to settle everything fairly. It will be interesting to see what they come up with as this will set as precedence for any future cases of this situation.
 
sport611 said:
Yes always close do not exercise, BUT THAT IS NOT POSSIBLE HERE. There is no trading in the stock OR Options.
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No if you are a buyer of options, you are entitled to exercise your options, that's your right. Nobody can take that away.
 
TheDawn said:
No if you are a buyer of options, you are entitled to exercise your options, that's your right. Nobody can take that away.
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Thats exactly the point of my post. Many brokers are restricting put exercise unless you own the corresponding stock. The ones that are allowing it are requiring large margin for the resulting short stock.

Even if you have the money to post the margin for the put exercise you may be paying large hard to borrow fees until you can trade the stock again.

Basically, the small retail customers are the ones really hurt as they will be unable to post the margin to exercise.

I my opinion, what "should" happen is either the stocks open for trading again, at least OTC, or the OCC comes up with a figure to facilitate cash settlement.
 
I bought some OTC stocks before.
Then there was a trading halt due to whatever reasons.
I could only close the positions half a decade later!
 
FSU said:
Thats exactly the point of my post. Many brokers are restricting put exercise unless you own the corresponding stock. The ones that are allowing it are requiring large margin for the resulting short stock.

Even if you have the money to post the margin for the put exercise you may be paying large hard to borrow fees until you can trade the stock again.

Basically, the small retail customers are the ones really hurt as they will be unable to post the margin to exercise.

I my opinion, what "should" happen is either the stocks open for trading again, at least OTC, or the OCC comes up with a figure to facilitate cash settlement.
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OCC better settle this to pay cash settlement according to the strike price on these options. The broker's restrictive action is illegal imo. They are not allowed to do that. Exercising options is an option holder's rights and arbitrarily requiring large margin to prevent exercising to facilitate a breach of contract is equally illegal as there is no risk of counterparty risk to the broker resulting from possible short-squeezes as the company is already insolvent and the value of the stock is zero so whoever exercised the puts to become the short sellers are able to enjoy all of the profit from the difference of the strike price and the market value of the stock on the day of exercise.

The put sellers in this case, very likely the dealers who sold the puts just don't want to pay up. They have no problem collecting from us when we are the ones who sold options that became ITM and when it's them whose short options are ITM and they don't want to pay up and the brokers even collide with them to extort margins from us?

Who are these brokers? You should publish their names here so we retail traders will know in the future never to open accounts with them. We are traders whose aim is to make a profit. There is no point in opening accounts with these brokers who will illegally prevent us from making a profit when we were right. At the same time, all these option buyers who are not being allowed to exercise their options or are being forced to pay large margins to do so should complain to SEC and FINRA about this illegal action. SEC is just looking into regulating brokers. And at the same time, they should also seek legal help. This is a major violation of securities law and a breach of contract on the option sellers' part. They better not spin this as put buyers being vultures on the misfortune of a failed bank blah blah blah, this is about investors' rights.
 
https://www.theocc.com/ https://infomemo.theocc.com/infomemos?number=52135

Information memo 52135

#52135
Date:MARCH 17, 2023

Subject:Trading Halt/Removal From Ex-By-Ex Processing/Expiration Summary

EXPIRING SERIES OF THE OPTIONS LISTED BELOW WILL NOT BE SUBJECT TO OCC’S
AUTOMATIC EXERCISE THRESHOLDS IN STANDARD MARCH 2023 EXPIRATION PROCESSING.

Holders of long positions in these affected options will need to make independent determinations of the value of the option deliverable in deciding to exercise, or not exercise, any expiring long position. If positive instructions to exercise are not submitted to OCC by the clearing member, expiring positions will not be exercised.

Option SymbolSecurityReason Out Of Ex-By-Ex
YNDX Yandex N.V. (YNDX) Class A Ordinary Shares Security Halted
OZON Ozon Holdings PLC (OZON) American Depositary Shares Security Halted
PTRCY PetroChina Company Limited Security not trading
RSX VanEck Russia ETF (RSX) Shares Security not trading
ORPHY Orphazyme A/S (ORPHY) American Depositary Shares Security not trading
CO Global Cord Blood Corporation (CO) Common Shares Security Halted
LFCHY China Life Insurance Company Limited(LFCHY)
American Depositary Shares Security not trading
TTM Tata Motors Ltd. (TTM) American Depositary Shares Security not trading
ZNHYY China Southern Airlines Company Limited(ZNHYY)
American Depositary Shares Security not trading
SIVB SVB Financial Group (SIVB) Common Shares Security Halted
SBNY Signature Bank (SBNY) Common Shares Security Halted

MEMBERS SHOULD ADVISE THEIR CUSTOMERS TO TAKE THE FOLLOWING CONSIDERATIONS INTO ACCOUNT IN DECIDING TO EXERCISE, OR NOT TO EXERCISE, THESE OPTIONS.


ALL CLEARING MEMBERS ARE REQUESTED TO IMMEDIATELY ADVISE ALL BRANCH OFFICES AND CORRESPONDENTS ON THE ABOVE.

For questions regarding this memo, please email the Investor Education team at options@theocc.com

Clearing Member Firms of OCC may contact Member Services at 1-800-544-6091 or, within Canada, at 1-800-424-7320, or email memberservices@theocc.com
 
Robinhood backs down over Signature Bank bets; Broker makes exception to its short position ban for clients who had winning 'puts' against failed lender
Jennifer Hughes - Financial Times
Robinhood has caved in to irate customers sitting on a windfall from betting on a fall in Signature Bank shares, after the online broker had threatened to let their lucrative positions expire without a payout. The investors had bought short-dated options on the Robinhood site that stood to net them big gains if the share price of Signature fell before the contracts expired.
/jlne.ws/3JMyKCb
 
Why didn't they just wait until Saturday to pull the plug on SIVB? I hate to be cynical but it really looks like a group wanted to be given an out on their commitments. As mentioned, it's time to post broker names.
 
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