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Options - Liquidations Involving Forward Looking Events


Overview:

 
In addition to the policy of force liquidating client positions in the event of a real-time margin deficiency, Place Trade will also liquidate positions based upon certain forward-looking events which, after giving effect to, would create undue risk and/or operational concerns. Examples of such events are outlined below.
 


Option Exercise

 

For example, an account whose equity on Day 1 consists solely of 20 long $50 strike call options in hypothetical stock XYZ which have closed at expiration at $1 per contract with the underlying at $51. Assume under Scenario 1 that the options are all auto-exercised and XYZ opens at $51 on Day 2. Assume under Scenario 2 that the options are all auto-exercised and XYZ opens at $48 on Day 2.

 

 Account Balance  Pre-Expiration  Scenario 1  Scenario 2
 Cash  $0.00  ($100,000.00)  ($100,000.00)
 Long Stock  $0.00  $102,000.00  $96,000.00

 Long Option*

 $2,000.00  $0.00

 $0.00

 Net Liquidating Equity/(Deficit)  $2,000.00  $2,000.00  ($4,000.00)
 Margin Requirement  $0.00  $25,500.00  $25,500.00
 Margin Excess/(Deficiency)  $0.00  ($23,500.00)  ($29,500.00)

*Long option has no loan value.

To protect against these scenarios as expiration nears, Place Trade will simulate the effect of expiration assuming plausible underlying price scenarios and evaluating the exposure of each account assuming stock delivery. Notification regarding excessive exposure will be communicated to clients on a best efforts basis, when identified well in advance of the close so that they may take the necessary actions to mitigate the risk. If, however, the exposure remains excessive, Place Trade reserves the right to either: 1) liquidate options prior to expiration; 2) allow the options to lapse; and/or 3) allow delivery and liquidate the underlying immediately thereafter. In addition, the account may be restricted from opening new positions to prevent an increase in exposure.

Physically Delivered Futures1

With the exception of certain futures contracts having currencies as their underlying, Place Trade generally does not allow clients to make or receive delivery of the underlying for physically settled futures or futures option contracts. To avoid deliveries in an expiring contract, clients must either roll the contract forward or close the position prior to the Close-Out Deadline specific to that contract (a list of which is provided on the website under the Trading and then Delivery, Exercise & Actions menu options).

Note that it is the client’s responsibility to be aware of the Close-Out Deadline and physically delivered contracts which are not closed out within the specified time frame may be liquidated by Place Trade without prior notification.

Place Trade CFD Corporate Actions1

In certain cases where a corporate action impacts a security which is the underlying to an Place Trade issued CFD, Place Trade may elect to close out the CFD positions prior to the ex-date. As a general rule, this action will only be taken when the nature of the corporate action is sufficiently complex such that a fair and transparent cash equivalent for the corporate action cannot readily be determined. Examples of these types of corporate actions may include spin-offs, mergers & acquisitions and statutory consolidations.

 
 
  1Place Trade is not offering futures including CFDs at this time and has provided this for informational purposes only. Place Trade plans to offer these products in the future.  


 

Special Options Notes

 

Pre-Approval for Options: Customers wishing to engage in transactions involving option contracts must obtain pre-approval by a Place Trade Financial Registered Options Principal. Approval is based on your investment objectives, financial information and trading experience provided on your account application. For additional information, contact client services at 1-800-50-PLACE.

 


Trading Options in an IRA:

Options are offered in all IRA accounts including puts and calls, covered calls and married puts.


Option Exercise Deadline:

The new deadline for exercising options is 4:00 p.m. EST. If you would like to exercise an option, please call a broker at 1-800-50-PLACE.


Options are traded on an online basis only:

Place Trade does not provide advice for options traders. All option trades are placed online.  When placing your order you must provide the correct option symbol and confirm that you are placing your options trade with the correct symbol prior to entering your trade - whether you place a trade online or with a broker.

 

Margin Requirements for each type of Option Strategy:

Interested in Trading Options on Margin? Learn about the Margin Requirements for each type of Option Strategy by Margin Combination.

 

 

Automatic Exercise Thresholds

 

Equity options:

Equity options will be automatically exercised if they are $0.25 or more in-the-money unless instructed not to exercise.


Index Options:

Index options will be automatically exercised if they are $0.01 or more in-the-money unless instructed not to exercise.

 

If you maintain a minimum of US $100,000 (or USD equivalent) equity/Net Liquidation Value in your margin account you may qualify for a lower margin requirement.

 

Get a free copy of the OIC's Characteristics and Risks of Standardized Options to read prior to investing in options

Download Characteristics and Risks of Standardized Options

Options involve risk and are not suitable for all investors. For more information; please read “Characteristics and Risks of Standardized Options” before investing in options. For a free copy call 1-800-50-PLACE or 1-919-719-7200 or visit the OCC. There is no guarantee of execution. Orders will be routed to US options exchanges.

Any trading symbols displayed are for illustrative purposes only and are not intended to portray a recommendation.

 

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