Although you don’t have an obligation to buy the shares, if they expire in-the-money (e.g. the price of Apple at expiration is over 170), your broker will probably exercise them for stock, i.e. you’ll have 100 shares of AAPL for $17,000. To avoid that, just sell before expiry.
-
-
Replying to @paulgb @strangestloop and
Even if it does get to 170, they usually won’t exercise contracts an account can’t support (ie if person’s account has < 17k in it). There are options like same day substitutions, and even if they did exercise, he could sell it. Though you’re right, selling option generally best.
1 reply 1 retweet 5 likes -
Replying to @Bonecondor @strangestloop and
Interesting, I always assumed a broker would do something like that if I didn't have enough cash when options expire ITM, but I've been afraid to try and find out.
1 reply 0 retweets 3 likes -
Replying to @paulgb @strangestloop and
I used to work for a brokerage firm and one of the jobs I had there was being a part of the team that monitored accounts that had positions they couldn’t support exercising on expiry day. I blew a lot of people out of trades at 3:30 pm on any given Friday for a couple years
1 reply 0 retweets 4 likes -
Replying to @Bonecondor @paulgb and
The caveat was always that we had the right to take action but not necessarily the responsibility to, since they were self-directed accounts, but we generally tried to not put Joe Blow’s $200 account with 2 ITM AMZN calls completely underwater
1 reply 0 retweets 3 likes -
Replying to @Bonecondor @paulgb and
it was your job to do this?? you would get them on the phone? wow
1 reply 0 retweets 1 like -
Replying to @DanielleFong @paulgb and
It was my job to call clients and leave them a very nice voicemail telling them that if they didn’t sell out by 3:30, I would probably do it for them. Didn’t have to have them on the phone for actual sellouts, though! And it was only my job on Fridays
3 replies 0 retweets 3 likes -
Replying to @Bonecondor @DanielleFong and
This makes me wonder how Robinhood and others do it, since I can't imagine them calling people up at scale as a discount brokerage.
1 reply 0 retweets 3 likes -
Replying to @paulgb @DanielleFong and
Robinhood doesn’t have a robust phone support group and reserves the right to start sellouts at 3, so I imagine they just have some dudes monitoring and selling when they can
1 reply 0 retweets 2 likes -
Replying to @Bonecondor @paulgb and
I also worked for a discount brokerage much bigger than RH and you’ve definitely heard of it, so it scales better than you think. We had about 20 people who helped out with sellouts
2 replies 0 retweets 4 likes
Loading seems to be taking a while.
Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.
