[Thinkorswim] What will happen to the options if left unexercised until maturity

JSOP said:
The OCC should really remove this auto-exercise rule that automatically exercises any options that's in the money for just 1 cent. That is absolutely ridiculous and is in violation of client fiduciary responsibilities as the option is exercised without the consent of the option holder and is actually unconstitutional; it violated Freedom of expression by the option holder. I don't know why it's there.

For the option writers, this is a nightmare. When you close your option position, you not only have to pay extra commission and fees but your profit automatically gets reduced because there is no way you can close the position at $0, the lowest price you can close the position is at 1 cent. If OCC just does not automatically exercise options, the option writers would not be penalized unnecessarily.

Luckily though according to OCC, only 30% of the options are ever exercised because it is ALWAYS more profitable to sell the option when it's in the money.
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tastyworks does not have closing commission.
 
The reason why I asked the earlier question is that I am thinking to buy a longer maturity option and not to be worried that it will lapse worthlessly (if it is ITM).

Just a little introduction, i have been trading FX and one of the things i do in FX is buying/selling on pullback.
So, I have been hoping to replicate it in Option.
Correct me if I am wrong, based on my brief experience in Option, pullback can only be done by buying a ITM call/put option with a longer maturity (in order for the underlying price to move in your direction).

May i know if there is any other way to do a pullback with Option?
Thank you.
 
vivaskyliska said:
The reason why I asked the earlier question is that I am thinking to buy a longer maturity option and not to be worried that it will lapse worthlessly (if it is ITM).

Just a little introduction, i have been trading FX and one of the things i do in FX is buying/selling on pullback.
So, I have been hoping to replicate it in Option.
Correct me if I am wrong, based on my brief experience in Option, pullback can only be done by buying a ITM call/put option with a longer maturity (in order for the underlying price to move in your direction).

May i know if there is any other way to do a pullback with Option?
Thank you.
More...

By Pullback you mean a short term Reversal in Trend?

Perhaps I am less Risk Adverse than you, but my preference is to risk OTM options. If the "pullback" is truly short term then my OTM option has more profit potential.
 
The more that I read this thread, the thought occurs to me that you should grab a book by McMillan or Natenberg to bone up on Options.

Probably McMillan would be best for you. Guy Cohen is another.
 
Patrick Slevin said:
By Pullback you mean a short term Reversal in Trend?

Perhaps I am less Risk Adverse than you, but my preference is to risk OTM options. If the "pullback" is truly short term then my OTM option has more profit potential.
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I was referring to a pullback in a trend following situation

I have been comparing the option prices btw ITM and OTM....and yea you are right in the sense that OTM option has so much more profit potential as its price is very low compared to a ITM option

thanks for the book recommendation, will definitely check Cohen's out too!
 
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