Options Exercise and Assignment Settlement

What this video covers

• Why the resulting stock transaction from an option exercise settles T+1 from the exercise date, not from the original option trade date
• How the Options Clearing Corporation (OCC) randomly selects assigned writers from all short holders in a series, with no choice allowed by the writer
• What assigned writers must do for calls versus puts: call writers deliver stock, put writers buy stock, and how the exam reverses these roles to trap you
• When American-style options can be exercised (any time before expiration) compared to European-style options (only at expiration)
• The OCC automatic exercise rule (exercise by exception): options in the money by $0.01 or more at expiration are automatically exercised for customer accounts unless a do not exercise instruction is submitted
• How a holder can override automatic exercise with a do not exercise instruction, or exercise an option that is not in the money by the $0.01 threshold
• Why supervisors must track expiration-day workflows to ensure client intentions override OCC automatic systems