Options Exercise and Assignment Settlement

What this video covers

• Why the resulting stock transaction from 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 and why writers have zero ability to avoid or redirect assignment
• What assigned call writers must do (deliver stock) versus what assigned put writers must do (buy stock), and how exam questions reverse these roles
• The difference between American-style options (exercisable any time before expiration) and European-style options (exercisable only at expiration)
• What exercise by exception means: OCC automatically exercises customer options in the money by $0.01 or more at expiration unless a do not exercise instruction is submitted
• When a representative can manually exercise an out-of-the-money option and when submitting a do not exercise instruction makes sense
• How to distinguish the option contract's original T+1 settlement from the brand-new stock transaction created upon exercise