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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe) -- Ignore unavailable to you. Want to Upgrade?

To: Madpinto who wrote (706)	2/17/1998 1:55:00 PM
From: ----------	Read Replies (2) \| Respond to of 2241

Hi Mike: I'm curious, though. The lady says the firm has an automatic exercise policy on in the money options. The discount firm I trade through has the same policy. Let's say the lady bought the puts in a cash account. She has never applied for, nor signed a margin agreement. Nor has she been provided the Truth in Lending statement. Nor has she given anyone trading authorization over her account. If the firm were to just dump a short position in her account, would you want to be the person representing the firm before the SEC? IMO, the firm would have a much better position and chance of survival if they had been in Hiroshima in 1945. My point being, there is NO WAY in holy Hades a firm can arbitrarily exercise a position in customer account and leave the customer in an at risk position. It may be done at the firm level, as the OCC suggests, using the cash settlement options as a model, but BOTH sides must be closed out if the firm is going to auto-exercise in the money options at expiration. Doug