If I'm short a call, and the contra exercises their option, how is that assignment tracked back to me?
Is the other side of my contract tied to a specific buyer? How does the OCC know to assign my specific contract?
asked Apr 17 '17 at 14:02
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Is the other side of my contract tied to a specific buyer?
No, the OCC is the entity on the other side of your transaction.
If I'm short a call, and the contra exercises their option, how is that assignment tracked back to me?
It's not - the OCC selects one of its clearing members (generally brokers) at random, and that firm then assigns one of its customers that has written the option (which could be random or could be systematic, depending on the firm's rules).
answered Apr 17 '17 at 14:26
The OCC utilizes a random procedure (a "wheel") to assign exercise notices to clearing members. The assigned firm must then use an exchange approved method to allocate notices to its accounts that are short the options. Here are two links that describe the process. The first one is a general description and the second one contains all of the gory details:
http://blog.mdwoptions.com/options_for_rookies/random-assignment-of-exercise-notices/
https://www.theocc.com/components/docs/legal/rules_and_bylaws/standard-assignment-procedures.pdf
answered Sep 20 '18 at 20:16
