List of Financial Market Terms

In the American system of writing options, an option can be option assignement explainedassigned at any time prior to expiration.  In general, the assignment risk increases as option remaining life decreases. TD Ameritrade Think or Swims’(TOS) policy is that any long option expiring at least 0.01 in the money, will be assigned.

Traders of options grow accustomed to the 100-lot option, that is, each option represents 100 shares of the underlying contract.  Therefore, the numbers used by the broker to describe the liability of an assigned expired option, which are numbers of shares, are 100 times larger than the trader is used to seeing on his trading platform.  Remember that cash settled options expire at close of trading Friday.  So the following Monday when the market opens, the assigned option no longer exists.  The liability is denominated in the value of the shares of the underlying contract. 

If on Saturday for example, one is assigned on 15 contracts of GLD 145 calls that expired 0.38 in the money at close of Friday trading, the liability is an eye-popping $217,500.  That is the debit created when the trader buys back his short position.  I know of no way to avoid this requirement.

Don’t panic, as they say.  Contact the Trade Desk of TOS for guidance.  They are pretty cool people, thank goodness.  You may be able to get what you need by e-mail.  Or, you can use the telephone.  For overseas callers, the phones are not a good option when the Trade Desk is very busy.  I use the chat facility of the trading platform to make a service request to the Trade Desk.. The Trade Desk is open at 06:00 CST on market days. 

Keep asking questions until you fully understand what’s needed.  Then when the market opens on Monday, go ahead and buy back the huge forbidding  number of shares.  Then sell enough contracts of the long position to get back to that familiar comfortable positive buying power status.

Open a thinkorswim by TDA account today!