Why does my TD Ameritrade account say this about options expiration?
“The last day to trade equity option contracts expiring on Saturday, 01/20/2007 is Friday, 01/19/2007. If you do not have sufficient funds/buying power to cover potential exercises or assignments, please deposit funds or close out your position before close of market on 01/19/2007. Please be aware that TD AMERITRADE reserves the right to close out any option positions at any time on the final trading day prior to expiration that would pose risk if exercised or assigned. Any equity option that is in-the-money by $0.05 or more at expiration will be automatically exercised.”
I UNDERSTAND the entire message except for the last line. Why would any equity option that is in the money by $.05 or more be automatically exercised??? I don’t understand that at all.
Thank you.
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March 28th, 2010 at 7:36 am
basically it means that if you’re option has come out ahead (ie, you’d make more than 5 cents by exercising the option (ie using it)) Ameritrade will exercise the option for you automatically for you instead of just letting it expire… so you’ll make the money….
March 28th, 2010 at 8:13 am
my friend, do yourself a big favor and never fool with options, your money will evaporate faster than if you just burned it with a match, options are very complicated and they move up and down super fast, if you don’t understand options, don’t bother with them. options expire the third friday of each month. just buy stocks it is much safer