So, I owned 10 calls on TSLA with a strike of $315.00 that expired last Friday (2/16). TSLA closed Friday at $335.49. Every call was intrinsically valued at $20.49.
I didn’t have enough money to exercise at expiration and thought that Etrade should have automatically sold them for me. Come to find out that over twenty grand has been removed from my account this morning.
WTF can I do? Are brokers not required to sell client options that expire in the money? I tried to sell them 20 minutes until close of the market too, but since I wrote 10 calls at the $350 strike they wouldn’t let me do this because I would be naked on the shorts. I only am approved for level 3 options, and my compliance department wouldn’t approve me closing the shorts (but approved of me selling the long call)… Which is weird in and of itself.
I’m 99% sure you didn’t lose the $20k. Are you sure that you’re not going to just receive the stock later? The settlement cycle is 2 days, meaning that you’ll only actually accept delivery tomorrow for options that expired last Friday. If you have an options trading account, you have a margin account, so I don’t think you need to actually have the cash to exercise call options.
I’m calling upon experience on this query - obviously I have contacted them.
That’s what I’m hoping. 1000 shares of TSLA would cost me over $300K - which I cannot support (even at $150K price using margin). As of now, the options have been pulled from my account. I thought it would work where they automatically exercise on my behalf and then give me the difference?
its a constant complaint that covered calls cant be rolled again until tuesday, generally back office processes run 2 days behind the front office so actual cash is always mismatched (trade date/value date accounting).
i am 99% sure you have the money tomorrow. (no I dont work there or have an account there)
i used to use optionshouse (which is now e trade) when i was in college. uhm usually i receive the stock. i have to manually sell it. uhm. if you dont have a lot of capital. i am not sure what happens but i highly doubt you lost your money if there was value to your options.
I’m trying to fight this, in their agreement it says the following:
In the event E*TRADE exercises an in-the-money option contracts for the Account, and in the absence of instructions from the Account Holder, E*TRADE may thereafter close-out any resulting positions (e.g., buy-in short positions or sell long positions).
They should have exercised these options. In other words you mean to tell me someone out there wrote 10 of these options and isn’t being required to deliver? HOW tf would a broker dealer be okay with that?
Maybe ETrade exercised the options but took the stock for themselves. Is there any language that says they won’t exercise the options on your behalf if you don’t have sufficient margin? I’m still expecting them to deliver the stock to you, since the situation is pretty ridiculous otherwise.
This is there full option agreement. It basically says “we CAN exercise on your behalf and then simultaneously sell the position of which you don’t properly have the capital to sustain - but we Don’thave to”.
looks like they just lost a customer in you - dont they offer a cashless exercise?
ohai - even if he has margin he might not have enough of a balance for 1000 shares of tesla on margin so why would they do that? seems like a nightmare for their risk/credit teams with little upside to the firm
Why not? People get margin calls all the time. They could have exercised part of his position, rather than zero. I still can’t believe Etrade buttfucked him like this. I have expired hundreds, if not thousands of one delta call options and I can’t remember a single partial assignment.
Also, based on that other thread, isn’t $20k like this guy’s entire net worth?
Tthats exactly why I’m so confused. Going into the end of market on Friday I actually sat at my computer all day very confident that “E*TRADE will close the position automatically there’s nothing I need to do”. All day long I spoke to people on the phone that said “it’s too risky for E*TRADE to lend someone the money” - which is bullshit. We can’t all be in the CFA program but im very concerned about the lack of competency at E*TRADE. Everyone I talked to just seems to have no clue what’s really going on. One guy told me “oh E*TRADE never sells in the money options Since we don’t have discretion” then someone goes back on that two hours later and admits that THERE WAS A BETTER WAY TO HANDLE THIS.
My last ditch effort is to write a letter to the CEO.
youd have to talk to a lawyer for that - im of the opinion they could argue your account value wasnt near the amount the margin call would be for, so from a risk perspective they didnt want to take that on but who knows honestly. pretty sure you fill out net worth info when you register as well & if you told them you had a net worth of like 50k and you had a margin call for 300k its obvious you arent going to be able to fund. id keep requesting a review or something and looking stuff up online but i cant imagine you come out on top here. not sure if/how any duty to mitigate losses on your behalf interacts with their internal risk controls.
Thanks for your help - although this is quickly turning into a therapy session, it’s going to be a painful lesson. At least I was right though! The net cost of my spread was about 13K and it grew to over 20K. I’ll make it back.