Paul,
As best as I understand it.... based on the CBOE rules...
12 3/4 was only 1/4 'in the money'. So the way the CBOE rules go, it's like this:
For the investor:
Unless you actually called your broker and closed out your 12.5 call position, before the end of the day Friday (and complied with any restrictions your brokerage may place on the last time to call in a position closing transaction on the day before expiry) [expiry being today, 3rd Saturday, with last day of trade on 3rd Friday] you may have been able to either sell or exercise your 12.5 NOVL call options. But if you did not receive execution of an order to close or exercise your call contracts, and they are less than $.50 'in the money', they expire worthless to you and you can't do squat about it. The brokerage gets to buy the stock at 12.5 and keep any profits, as I understand it.
Conversely: if they had been more than $.50 'in the money', and you did nothing with them... they would have been 'automatically' exercised on your behalf and you would be presented with the 'physical' stock and a bill for the total transaction $1250/contract+commissions. You must come up with the money, in your brokers hands, to settle the purchase by end of day Monday. Option transactions require settlement on the next business day ie Monday for expiry transactions.
The analogous situations arise with puts...
So... all the calls were exercised, and yes those share have to come from somewhere, you just can't just write a check for what they were worth on Friday. But in the case of the 12.5's the brokerages got the profits, not the option holders.
Did that answer the question? Anyone know if there is any error in my understanding here?
Ben A. |
