Source
r/options•
OhLawdDatAss

ITM options not assigned at expiration

I was short three ROKU Feb 28 $115 put contracts coming into last week. ROKU closed on Friday at $113.67. I fully expected to be put 300 shares of ROKU at the end of AH trading last Friday. I was only assigned 100 shares and the other two contracts expired.

Has anyone ever seen an option that far in the money go unassigned? This trade was made through Interactive Brokers. I keep checking my IB account this weekend thinking I'm going to find the entire 300 shares of ROKU in my account but it hasn't happened...yet.

Any thoughts?

Final Resolution: the two ITM contracts went unassigned. Strange!

Posted Mar 1, 2020, 5:27 PM UTC · edited

535
mward86•

Could have got lucky and whoever owned the options didn't have cash to cover the position, or if it's someone who owns the stock and bought it as insurance, they might not want to sell their shares for barely $150 in profit if they bought in way higher or expect the stock to rise along with netflix with all the people staying home.

5
OhLawdDatAssOP•

Why would the put owners need cash to cover the position? By owning the put, they had the right to put the stock to me at $115, while it was trading substantially lower throughout all of Friday. That doesn't require any cash on their part. ROKU actually traded in the $107s on Friday. It's just very odd to see anyone leave money on the able.

1
mward86•

If they bought the put but didn't own the stock, they have 3 options at expiry. Buy the shares at market price and then sell them to you for profit, sell the put for profit, or let it expire. They might not have had enough money to do the first option, is what I was saying.

They also might just be someone that didn't manage their positions. Some brokers would auto exercise or try to sell the option, maybe he relied on the broker to do it for him but the broker couldn't find a buyer so it expired.

3
notyetcomitteds2•

I had my auto excercise turned off by my broker after it happening once. I have fallen asleep through expiry a few times also.

2
Drugba•

I've heard one or two stories of people getting lucky and not getting assigned on losing trades, but I feel like that's super rare, especially now that it's almost all automated. Technically it's possible though, so fingers crossed.

The only other thing I can think is since options don't technically expire until Saturday¹, maybe it's just some weirdness with IB not being updated. If the first put was exercised mid-day and the other two were exercised right at closing, and some job that updates your account just hasn't been run yet.

I'd wait until Monday and see what your account looks like.

¹ https://www.investopedia.com/terms/e/expiration-time.asp <- this is not up to date

4
idontmeanmaybe•

options don't technically expire until Saturday

It's been 5 years and this still gets repeated on r/options. They expire Friday:

http://www.cboe.com/products/options-on-single-stocks-and-exchange-traded-products/options-on-single-stocks/equity-options-specs

The expiration date for equity options is the Saturday immediately following the third Friday of the expiration month until February 15, 2015. On and after February 15, 2015, the expiration date will be the third Friday of the expiration month.

5
Drugba•

Oh wow, I was totally unaware that changed. I don't hold options to expiration, so I've never really researched expiration dates other than when I learned about them years ago.

Thanks for the heads up, I've updated my post to reflect that my initial statement was wrong.

2
OhLawdDatAssOP•

Yeah, for a contract to be that far ITM without exercise is really, really strange. The one contract that was put to me showed up in my account after market close. The other two contracts show as expired, per IB. I'll keep checking and will come back on Monday and update this post with the resolution.

1
Slowmac123•

Just following to see the update

2
Baraxton•

You got lucky. They would have been assigned already. I’ve been using IB for a long time and never seen this. Nice little surprise.

2
TF_Sally•

Can't speak to IB, but on RH it usually doesn't clear until monday morning - check your account history or trade log and you might see the assignments come through before your account full reflects

1
redtexture•

Waiting to see if you are informed Sunday evening or Monday morning.

1
orbital_one•

It's possible the buyer didn't have the shares to sell to you and a contrary exercise notice was sent to the OCC.

3
OhLawdDatAssOP•

Yes, that's a possibility. I guess I would have expected the put buyer to sell them while they had some intrinsic value as opposed to letting them expire worthless.

2
estgad•

With the rally at the end of the day the buyer of those puts may have chosen not to exercise because they are expecting a movie up on the open Monday. Assuming they have this expectation, if they exercised after the close, then they would not be long the stock, or may even be short the stock, and a move up most created a lot for them.

I am not saying this is what happened it is just a logical possibility for why a buyer of those puts may have chosen not to exercise the option.

3
joem4h•

The person with the itm long put can decline to exercise it at expiration. Ussually doesn't happen because it's locking in the loss of the premium paid if you don't exercise.

Who ever was holding the other side of your trade either sees something nobody else does, or is an idoit. Probably an idiot who thinks they know something nobody else does.

3
ScottishTrader•

Yep, I've had this happen when the long option buyer tells their broker not to exercise. It is rare but has happened to me . . . By Monday morning you will know for sure.

3
eoliveri•

I don't know why, but the same thing happened to me with the SWKS $101 puts I wrote last Monday that expired Friday. SWKS closed at $100.18, but I haven't had to buy the stock yet ....

2
OhLawdDatAssOP•

Your broker wouldn't happen to be IB would it?

2
eoliveri•

No, but a friend of mine whose broker is IB is still waiting to find out if they had shares put to them ....

2
shadowconservatory•

The system is probably just backed up and you'll get assigned before Monday. However you might get lucky, it happened to me once.

2
BokBokChickN•

With the excessive volume on Thursday and Friday, i wouldn't be surprised.

2
creepyMaintenanceGuy•

Expiring contracts settle before the open of the next trading session - technically the OCC has until the next Monday open to assign.

2
OhLawdDatAssOP•

I'll update the post tomorrow.

1
Vast_Cricket•

Try to add more premium to invoke an assignment. In answering your question I have several like yours unassigned.

1
OhLawdDatAssOP•

Interesting. I've had a few contracts go unexercised when they were a few pennies ITM. None that I recall ever being over a buck ITM. We'll see how many shares of ROKU I actually own tomorrow.

1
Nikandro•

Has anyone ever seen an option that far in the money go unassigned?

No. I've always been assigned, even if it's only $0.05 ITM. The house automatically exercises all ITM options. Maybe your account hasn't been updated yet?

1
[deleted]•

[deleted]

-1
OhLawdDatAssOP•

No, I was short the puts. That's why I was expecting to be assigned the 300 shares.

2
Drugba•

No. A long call gives you the option to buy, a short put gives you the obligation to buy and it gives someone else the option to sell at a certain price.

From his description, it definitely sounds like he was correct in saying he was short.

0
OhLawdDatAssOP•

This is correct. I'm not sure why you're getting downvoted.

2
Drugba•

I assume the down votes are from the guy who was arguing with me and then deleted his comments when he was proven wrong. He seemed very certain he was correct until I cited sources.

Reddit is weird sometimes haha.

2
RayPowers•

I had a short call on $MA week after the JAN 2020 monthly's, but short call ( JAN 24 weekly) was part of a debit call spread. Was ITM by almost 2 dollars, I wasn't assigned, however the other leg was exercised in my account creating a margin call w/TD.

The high for the day on Monday (JAN 27) for $MA was about 4 dollars below close on Friday, which resulted in large loss (selling 100 shares to satisfy margin call).

My best guess to why it happened to me was the equity was down during the week and a trader or MM did not need to exercise the opposite of my short position. Your experience is the weekly after the FEB 2020 monthly's.

Did the non-assignment cost you a profit or were you simply selling the calls as a bearish position?

2
OhLawdDatAssOP•

Ugh, sorry to hear about your experience. I was selling puts, not calls. I was prepared to be assigned the 300 shares of ROKU. I'm not particularly bearish or bullish on ROKU, I just see it as a trading vehicle. That said, most of my trades are on the long side.

1
RayPowers•

I contacted TD on after not being assigned and was informed OCC sends out a list to them of their account holders that will not be assigned (Calls & Puts). Seems you had 3 potential ITM not to be assigned and only 2 occurred.

When it happened to me the Open Interest on the short option was low - under 70 total if I recall correctly.

2
[deleted]•

[deleted]

0
Drugba•

No that's completely wrong. Read the second paragraph here https://www.optiontradingtips.com/strategies/short-put-option.html

Shorting a put option means you sell the right buy the stock. In other words you have the obligation to buy the stock at the strike price

A long call gives you the options to buy which means a short call gives you the obligation to sell.

A long put gives you the options to sell, which means a short put gives you the obligation to buy

1