0

I recently bumped up against the exercise limit for number of option contracts I could hold at once. I.e. a message saying I couldn't hold more than 500 when attempting to do a Buy to Open on Call options.

How do I determine what these limits are in advance? Are they potentially different for each option?

I saw one statement in an article say they are the same as the underlying stock's position limit, but I'm not sure best way to determine that either.

  • 2
    this was a limit created by your broker, not by the regulators. tell your broker to bump up your limit. – CQM Oct 14 '17 at 23:00
  • Thanks, out of curiosity, are you coming to that conclusion based on the size of the limit? I.e. the exchange limits would usually be much larger than this? – AaronLS Oct 15 '17 at 2:16
  • regulatory limits are published and are much larger, think like 250,000 contracts on a single side of the order book. – CQM Oct 15 '17 at 22:20
2

There are Position Limits which are listed in the rules of the exchange where you are buying the option contract.

These are usually very high (e.g. of the order of 2.5 million contracts for Apple, Inc. at the time of writing per the OCC position limit data: https://www.theocc.com/webapps/position-limits )

There are also often limits on the size of orders that your broker or the exchange may accept through their system (so-called 'fat finger' checks).

Your broker may also be checking against the capital in your account to ensure that you have sufficient capital to be able to have the order executed. They don't want to run the risk of executing a customer order that the customer cannot pay for.

If you hold a certain number of contracts, you have the right to exercise those contracts - I am not aware of 'exercise limits' per se, unless you have insufficient capital to exercise them.

I would you suggest that you contact your broker to find out:

  • What precisely is the limit that your are encountering;
  • Whether that is an Exchange Rule, a FINRA rule, an SEC rule, or the Broker's own policy, and the rule number.

You can then look up the rule to get an understanding of what it is all about.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.