Mark I think you are not focusing on what we are discussing here. We are not trading OTC, Futures, Index funds, or Currencies. So the information posted is valid. I am not saying the information you have given is not important I am just saying it is an addendum and something to be aware of.
I can only go by what the Schwab broker told me. Since I trade with them I will go with their explanation. If you trade with someone else I suggest you talk it over with them. Although you would think all brokers have the same rules, maybe some are different.
Right. That’s why I included the “General definition” of expiration time. That applies to all options covered by the OCC by-laws form of contract. The additional ones that I included are the exceptions to that general definition. I included a link to the actual document, so you can go look at it yourself!
That means that by contract, the expiration time of the typical equity options we trade is indeed 11:59pm*. However, because exchanges and brokers have differing rules regarding “business hours”, and usually require a phone call to effect a “do not exercise”, the practical cutoff is likely earlier than that. Maybe Merrill only takes a “do not exercise” by 4pm eastern. Maybe Fidelity takes them until 5:30pm eastern. And, of course, there’s also the real world to consider here - let’s say you hold an option that is in the money, but at 4:30pm there is huge news that will surely cause the stock to dramatically move on Monday morning. You hear that huge news on the 5pm news broadcast, and at 5:10pm you decide to call for a “do not exercise”. Then you call your broker and you are on hold, probably because thousands of others are also calling the broker at the same time, and 5:30pm comes and goes while you are still on hold. And at 6pm, your call gets shifted to “we apologize for the delay, please call us back during business hours”.
* This may also explain why we usually get the email about assignment (or expiration) sometime early Saturday morning. Because legally, per the actual verbiage of the contract, they can’t send it until after midnight.
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From what my Schwab broker told me is that the Buyer and the Market Maker are subjected to the same time and that is 1.5 hours after closing. I think that has to be true because if you had different rules for different people then this all would become very confusing and also I could see lawsuits being thrown around. Now if your broker wants to setup sub rules for you such as 4:00 EST is the close I am sure they have the right to do that but then that is why, as consumers, we can shop for the broker that meets our needs.
Sure that may be the rule on paper, and likely is (that everyone has the same latest time). But in the real world, that may be meaningless. We, the retail buyers of options, have to make a phone call, and have to talk to a human, and then that human has to make a notation somewhere, etc. But for the market maker, they have a computer that scans ALL expiring options, thousands, tens of thousands, of them, and then decides which are good to allow to be exercised, and which are not. And then all those thousands are notated “exercise” or “do not exercise” all at once. They can have human input for special cases. They can even finalize their choices at 5:29pm if they choose. We, retail buyers, can’t even dial the number and get to the right person at 5:29pm.