Excercising options on futures in real time

[gigarisk]

Personal account. Not much margin.



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

[ebal]

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]

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

[Patrik]

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*.