I sold options with the same exercise date and strike price for two (2) different brokerages. For one (1) brokerage the options were exercised so now I am long x-amount of shares that are high margin that now I have to force sell to not get a regulation-T. The other brokerage I am still short the options. I called the brokerage for the options that were exercised, explaining how come the options were exercised in one account and not the other if they are exactly the same. The said the "contra-party," so the actual individual who exercised. I asked can if I can see this information and they don't have it and told me to call the CBOE. I feel like I have the right to know the party that exercised the options, if not, how do I know it actually occurred? Where is the transparency? How do I know now anytime I am on a winning trade the brokerage can just exercise and I have to force sell and lose my trade. Has anyone encountered this?
Selling Options that were exercised two different brokerages
byu/Solid_Talk_1413 inoptions
Posted by Solid_Talk_1413
14 Comments
You do realise it’s random when selling right? For any person buying you have odds of being assigned early or not at all.
Assignment is random and done by the OCC/CBOE. Someone chose to exercise [early] and you got unlucky.
Surely you don’t actually expect your broker to identify the party that exercised.
Details needed for a more intelligent discussion.
Heres the way the process works. When someone exercises an option, the OCC (Options Clearing Corp) will randomly assign it to one of its member firms/brokers. That broker will then assign it to one of its customers who was short the option. This is done by a predetermined process, usually random, but it could also be another method such as FIFO.
So, if only a few options are exercised, this explains why you were assigned in one brokers account and not another. You may also only be assigned on only a portion of your short options.
Early assignment wouldn’t increase the max risk in a trade. The additional buying power requirements might force you to take action though.
You’ll never get that info and really it shouldn’t matter. You face the exchange and they randomly assign out exercises. If the options are deep ITM around year end and you just held them , thats on you. One cp could have exercised 100 options and your broker got hit with a small slice or 100 cp could have exercised 1 option each and your broker got hit with a few options. If you really think there is some trickery going on here , take off your tinfoil hat. If you want to reinitiate the share/option position just put it back on when the market reopens. The fact that not all the options were exercised tells me someone is acting inefficiently. You either have a windfall gain on the assignment or a gain on the outstanding short options.
*** I would also say that if your broker told YOU to call the CBOE to get this info, that is a joke and when the hung up the phone they all had a good laugh imagining how that conversation would have went.
http://www.theocc.com/getmedia/eebc0b12-73d0-40f4-a024-020f55cb2d0e/OCC-Primer-Exercise-Assiginment-F.pdf
http://www.optionseducation.org/optionsoverview/exercising-options
Yeah well contact authorities is the best bet.. I obtained contracts for Rivian back at 8 a share and they were about to hit my strike price and the were force executed because I didn’t have 60k in the account to cover the shares… I told them I didn’t want the shares I would simply exercise the option, but so I decided it was in their best interest to sell my options out from under me for a loss rather than waiting two hours until the end of the day where I would had made tens of thousands in profit.. instead I owed money.. I contacted the SEC and they were able to at least get Sofi to balance my account back to where it should’ve been.. smh watch these sneaky mf’s
“Help, the exchange won’t DDOS the ASSHOLE who STOLE FROM ME!”
This is normal and there’s no lack of transparency or broker funny business here.
When you sell options, you’re assigned based on random assignment through the OCC, not based on who bought your specific contract. Each brokerage submits exercised contracts to the OCC, and the OCC randomly assigns those exercises to short positions within that brokerage only.
That’s the key point.
Because these were held at two different brokerages, the assignment pools are completely separate. One brokerage happened to receive an assignment, the other didn’t — even though the options are identical.
A few clarifications:
You will never know the identity of the counterparty. That information is not available to brokers, CBOE, or retail traders.
The broker did not decide to exercise anything. The long holder exercised, the OCC processed it, and your account was randomly assigned.
Being assigned on one account and not the other is very common when positions are split across brokers.
If you’re short options and don’t want assignment risk, you need to close or roll before expiration, or manage margin so assignment doesn’t force liquidation.
Nothing was taken from you and nothing was exercised “against” you unfairly — this is exactly how listed options are designed to work.
There is no specific “contra party”. Some number of people exercised early, probably a “buy the dividend” action. The OCC randomly parceled those out to brokers. In turn, your broker randomly (probably, though other processes are possible) parceled them out to the accounts with short positions.
So, there is no specific individual holder of a long call tied to the exercise of your short call.
You really need to stop thinking of options as some kind of “I’m the person on this end, and there’s a specific person on the other end” situation, because that isn’t at all how it works. And you wouldn’t have a “right to know” even if it worked that way.
So someone put stock to you. Just sell it. It was a trade. Move on. Like everyone else told you, it’s random.
Well Options Karen, I suggest you ask to speak with the manager.
Sounds like you are new to this, but why do you trade in two different brokers?
You can actually Sell an option that is already exercised. The owner (buyer) of the option exercises the Option at 10am. You Sell the Option at 2pm. That night the exchange picks your broker since they have that Option Sold. Your broker picks your account.
Is this possible? Yes and it is more likely today with all the newbies trading options and not understanding what they are doing. Someone just clicks the exercise button . So if your option was exercised early that might be a good situation for you since they lost all the extrinsic value. Anyhow it would never occur to me to keep the stock position (long or short) if exercised , just close it. I trade options , not stocks.
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