What is the settlement price? It's not a futures contract, so idk what that means.
Will I be assigned?
- Thread starter misterkel
- Start date
What is the settlement price? It's not a futures contract, so idk what that means.
Normally the closing/settlement price (of the stock) used to determine automatic exercises of options (which can still be overridden) is based on a closing auction on the primary exchange. The question here is what price is used as this is now traded OTC.
OMG!!! In general sense like 99.99999999% of the case, if the strike is above the market price of the underlying, the short call won't get assigned. Yes once in a very blue moon, you are going to get an idiot noob or somebody who's drunk or somebody who really wants to get their hands on the underlying and just can't get it in the stock market due to restrictions (like with the GME stock restriction) or some other odd/special reasons who's going to exercise an OTM call but generally in won't happen. Jesus!
It's the settlement price of the underlying that's going to determine the auto-exercise status of the option with the possibility of the option holder overriding it. It's the price of the stock at the close of the market on the expiration date of the call. If it is above the strike price, the option will be auto-exercised unless the option holder elects not to exercise it. If the settlement price is below the strike price of the call, unless the option holder elects to exercise the option, the option will not be auto-exercised.
Now whether you will be assigned or not also depends on your luck. What happens with the assignment process is that the broker receives a batch of assignment orders and then randomly picks the option sellers whose short options are ITM so sometimes you might get lucked out and not get picked to be assigned but in general sense, you would be assigned if your short option is ITM.
And in this case the fact that the stock is traded OTC is irrelevant. The assignment of the opotion will still go ahead with whatever is the settlement price of the stock. The stock trading OTC just means it's not being traded on an exchange anymore but there is still a price.
Is there any current pricing data in another country? It's kinda irrelevant now, but there might be a reason to exercise if the foreign market can provide more robust pricing. If the away market trades options I can generate an implied forward - just like futures. Why would I exercise a US OTM?
Currency issues, tax games, corporate actions, and better pricing data in the away market.
Common in Mexican and Asian names.
Currency issues, tax games, corporate actions, and better pricing data in the away market.
Common in Mexican and Asian names.
It's not just the close price that matters. What happens in the aftermarket can also affect whether the option is assigned or not. If XYZ closes at 99.90, but trades above 100 in the aftermarket (which can frequently happen), someone who is long the DTE 0 XYZ 100 put with the plan to let it exercise, might tell their broker to not exercise if they can get a better price in the aftermarket.
Yes the pin risk but I am talking about in general cases. How much of a pin risk do you think there is going to be on this one? The underlying is going to trade OTC and the exchange can only accept exercise instructions by latest 4:30 PM CST, 5:30 EST.