TD to Schwab Transition and options behavior

[lnofeisone]

I have a question for those of you who use Schwab. I got 8 ITM put positions (8 different companies) that got moved from TD to Schwab. Over the past two weeks, all got put on me. It could be coincidental with market movements, but it feels weird to have all of them exercised. They weren't particularly deep ITM (e.g., HSY $200, BAX $40), and they weren't particularly close to expiry (3-12 months out), and some I've held for some time now (longest about 8 months).  

 

Is this me just being paranoid and all coincidental or do ITM put/call positions on Schwab just tend to be exercised more often? 

[boilermaker75]

I've had accounts at Schwab for over 25 years. Currently 6 accounts between me, my wife, and my daughter that I actively sell puts in every week. I rarely get put to other than at expiration. Maybe 1% of the time do I get put to early.

[lnofeisone]

3 minutes ago, boilermaker75 said:

I've had accounts at Schwab for over 25 years. Currently 6 accounts between me, my wife, and my daughter that I actively sell puts in every week. I rarely get put to other than at expiration. Maybe 1% of the time do I get put to early.

Thanks for this @boilermaker75. Very helpful reference point. Maybe just my luck. 

[aws]

The broker has no say in who gets assigned on short options. I was going to write up my understanding of how it works, but I decided to be lazy and have ChatGPT do it for me:

 

When a buyer of a stock option exercises the option early, the process of determining which seller is assigned the option is typically handled by the options clearinghouse, such as the Options Clearing Corporation (OCC) in the United States. The clearinghouse uses an automated random assignment process to decide which seller (writer) of the option will be assigned the exercise notice.

 

Here's a step-by-step overview of the process:

 

Exercise Notice: The option holder (buyer) notifies their brokerage firm that they wish to exercise the option.
Broker Notification: The brokerage firm forwards the exercise notice to the options clearinghouse.

Clearinghouse Assignment: The clearinghouse uses a random assignment process to select a seller who has written (sold) the same option contract.

Broker Notification: The clearinghouse notifies the brokerage firm of the seller who has been assigned the exercise notice.

Seller Notification: The brokerage firm informs the assigned seller (writer) that they have been assigned and must fulfill the obligations of the contract.
This random assignment process ensures fairness and transparency, distributing assignments across all potential option writers who have open positions in that particular option contract.

[lnofeisone]

2 minutes ago, aws said:

The broker has no say in who gets assigned on short options. I was going to write up my understanding of how it works, but I decided to be lazy and have ChatGPT do it for me:

 

When a buyer of a stock option exercises the option early, the process of determining which seller is assigned the option is typically handled by the options clearinghouse, such as the Options Clearing Corporation (OCC) in the United States. The clearinghouse uses an automated random assignment process to decide which seller (writer) of the option will be assigned the exercise notice.

 

Here's a step-by-step overview of the process:

 

Exercise Notice: The option holder (buyer) notifies their brokerage firm that they wish to exercise the option.
Broker Notification: The brokerage firm forwards the exercise notice to the options clearinghouse.

Clearinghouse Assignment: The clearinghouse uses a random assignment process to select a seller who has written (sold) the same option contract.

Broker Notification: The clearinghouse notifies the brokerage firm of the seller who has been assigned the exercise notice.

Seller Notification: The brokerage firm informs the assigned seller (writer) that they have been assigned and must fulfill the obligations of the contract.
This random assignment process ensures fairness and transparency, distributing assignments across all potential option writers who have open positions in that particular option contract.

Thanks, @aws. It looks like I beat some serious odds of being randomly selected.

[aws]

Yeah it does sound unlikely but, based on how you described the options, the buyers gave up a fair amount of options value by exercising early. You can probably re-enter at a better price on most.

 

Except for things like short calls into a dividend payment or short calls on hard to borrow stocks, it's usually to your benefit to be assigned early.