Equity options expire the 3rd saturday of every month. Since there is no trading on saturday... why is this?
After hrs today DNDN shares jumped 15% and some guy on CNBC's fast money said that someone is still able to capture value in the august options because they dont expire until tomorrow. IS this True?
Question about options
Started by
saltlake
, Aug 17 2007 09:20 PM
5 replies to this topic
#2
ogm
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Posted 17 August 2007 - 09:30 PM
Equity options expire the 3rd saturday of every month. Since there is no trading on saturday... why is this?
After hrs today DNDN shares jumped 15% and some guy on CNBC's fast money said that someone is still able to capture value in the august options because they dont expire until tomorrow. IS this True?
Yes, technicaly options expire on Saturday.
#3
dcengr
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Posted 17 August 2007 - 09:38 PM
That was payment to Ben for the surprise rate drop.
Its gotta come out of somewhere 
Qui custodiet ipsos custodes?
#4
IYB
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Posted 17 August 2007 - 11:54 PM
YES. Assuming that you never sold your calls that were, as the end of the regular session and end of options session --out of the money-- then you still own those calls tonight.You can exercise them by buying the stock at strike price, and then sell that stock Monday (or whenever you wish) at what has now become the market price.....Of course you've gotta pony up for the stock you are buying by exercising options, AND you take ovenight risk that market is still there Monday when you want to sell.....Equity options expire the 3rd saturday of every month. Since there is no trading on saturday... why is this?
After hrs today DNDN shares jumped 15% and some guy on CNBC's fast money said that someone is still able to capture value in the august options because they dont expire until tomorrow. IS this True?
“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.” ― Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds
#5
NAV
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Posted 18 August 2007 - 12:44 AM
My understanding is one has to send explicit orders to the broker to exercise stock options which are less than .05 ITM or OTM. That should be done before the market close on the OPEX day. Like IYB said the only way to capture that after hours gain was by exercising the option.
Here's IB policy on exercise.
Here's IB policy on exercise.
Stock options expiring in the current month that are $0.05 or more in the money will be automatically exercised by the OCC without the need for any explicit instructions from IB.
Index options expiring in the current month that are more than $.01 in the money will be automatically exercised by the OCC without the need for any explicit instructions from IB.
The OCC must receive "contrary intentions" through the TWS Option Exercise window if you want to:
exercise a stock option that is in the money by LESS than $0.05.
exercise a stock option or index option that is out of the money.
#6
tommyt
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Posted 18 August 2007 - 11:12 AM
options on expire on Saturday, but the most important thing is the exercise cutoff time. Here on the left coast, options stop trading at 1:00 Friday before, and the cutoff to tell your broker you want to exercise is 1:40 pm I believe. Now, options that are closing .05 in the money, automatically exercise. The item at hand though is stocks that have calls for example, that close out of the money at 1:00, then bullish news comes out at 1:20. Suddenly those calls that seemed to expire worthless are in the money. You have until 1:40 to give notice to your broker that you are exercising, otherwise they won't. Years ago, the cutt off was at 2:00 pm on Saturday, and it left the door open for news to come out for another day...which led to issues, and the earlier cutoff.
