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gigarisk


Total Posts: 22
Joined: May 2012
 
Posted: 2017-06-09 15:58
I funded a personal account on IB and bought some options. They went way into the money but the Trader Workstation software doesn't let you exercise them with a mouse click. Instead they want me to submit a ticket via the support ticketing system and some unspecified hours later someone will manually exercise the options and optionally close out the delivered futures.

Is this common for all futures brokerages?

Can anyone recommend an alternative that does let you exercise options on futures from your UI in real time?

Edit: worth mentioning the book dried up and there was no way to exit, ergo the decision to exercise.

Thanks

Martinghoul


Total Posts: 859
Joined: Oct 2008
 
Posted: 2017-06-09 16:51
Wait, you're trying to exercise one of those early?

Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...

gigarisk


Total Posts: 22
Joined: May 2012
 
Posted: 2017-06-09 16:57
Yes. I thought this was okay because, from the contract spec:
Exercise Style: American

Martinghoul


Total Posts: 859
Joined: Oct 2008
 
Posted: 2017-06-09 17:00
It's certainly OK, but what's the reason that you feel you should do this? It's seldom optimal...

Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...

gigarisk


Total Posts: 22
Joined: May 2012
 
Posted: 2017-06-09 17:04
Its seldom optimal .. to exit a position when you want to? I dont understand.

Martinghoul


Total Posts: 859
Joined: Oct 2008
 
Posted: 2017-06-09 17:05
It is seldom optimal to early exercise American options as a way to exit the position...

Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...

gigarisk


Total Posts: 22
Joined: May 2012
 
Posted: 2017-06-09 17:07
I have only two ways to exit an option position : in the orderbook or exercise correct?

if the book has zero liquidity what else can you do?

Martinghoul


Total Posts: 859
Joined: Oct 2008
 
Posted: 2017-06-09 17:09
Is it a deep OTM or deep ITM option? Do you have RFQ capacity in your platform?

Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...

gigarisk


Total Posts: 22
Joined: May 2012
 
Posted: 2017-06-09 17:10
It became deep ITM, so thats probably the issue.

Haven't used IB before, will check for this thanks.

Martinghoul


Total Posts: 859
Joined: Oct 2008
 
Posted: 2017-06-09 17:14
If it's deep ITM, why don't you just do the delta?

Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...

gigarisk


Total Posts: 22
Joined: May 2012
 
Posted: 2017-06-09 17:16
Personal account. Not much margin.

Edit: but yes, this is a good reason to fund it properly..

ebal


Total Posts: 16
Joined: Jul 2009
 
Posted: 2017-06-09 17:58
I don't think there is such a thing as real-time exercise. Usually, your broker is supposed to submit instruction to the exchange at the end of the day, and then the exchange processes all E/A at night, e.g. Clearing Timeline

I don't know about future options, but at least for stock options IB has a GUI window (Trade->Option Exercise in classic TWS, not sure about Mosaic) that allows you to submit exercise instructions without actually submitting a ticket through account management.

Baltazar


Total Posts: 1763
Joined: Jul 2004
 
Posted: 2017-06-13 00:14
I can't see how that would be possible.
When you exercise your long option, a counter party get assigned and has one of his short disappear.
Imagine the mess if your option position that is nicely hedged start missing short legs
out of the blue without even notifying you because some random dude exercised his option?
This is the reason why it is done when the market is closed, so that counter party knows before it reopens what his position is.

Note I never worked with FX options, I dunno for these as the market is open 24/6

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Patrik
Founding Member

Total Posts: 1337
Joined: Mar 2004
 
Posted: 2017-06-13 01:07
The rules around exercise and assigns are pretty clearly laid out by the exchanges. That's what applies to self-cleared players, for everyone else you then also have to factor in what your FCM/clearer does on top of that. In general markets will have re-opened by the time you know about assigns if you don't self-clear - but it isn't really an issue unless you're very close to expiry. In fact it's a nice little surprise in most cases (as exercising tends to be suboptimal for most contracts). There are occasions when it can be an issue, but it tends to be more related to uneconomical exercises done on the expiration date itself - if the underlying future expires only a session or two later and liquidity will be poor, then a sub-optimal exercise can still be used by people playing games and trying to get folks in trouble with few outs in low liquidity.

In my experience, valid for commodities only, you tend to get notified about assigns later and later the further away you go from dealing with old school Chicago based ex-floor people. The range can be pretty large, from ~midnight London time for good service to afternoon of the next day for bad cases *cough JPM*.

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