Why Did My Account Make an Automatic Option Purchase?
Summary of User’s Issue and Solutions Discussed:
- The user is confused about an automatic purchase of closing options for stocks, which was unexpected and implies prior action that the user did not take.
- Fidelity explained that if they do not receive instructions to exercise and a contract is out-of-the-money at expiration, it will expire worthless, but in-the-money contracts might be automatically exercised.
- Fidelity advised the user to take action on expiring positions promptly to avoid potential liquidation and mentioned that reminders are typically sent before expiration.
- Fidelity suggested contacting their phone associates for a more detailed investigation into the user’s account and the transaction in question.
Here’s the full thread
Why did my account automatically purchase closing options?.
The history log says “you bought closing transaction option liquidation” for xela and ault stock.
Thanks for checking in, @Genkidin – (งツ)ว. If Fidelity does not receive instructions to exercise, and a contract is out-of-the-money (OTM) at expiration, it will expire worthless. If you have a Do Not Exercise (DNE) on the account, both ITM and OTM contracts will expire worthless unless you request a manual exercise. Alternatively, contracts that are in-the-money (ITM) by $0.01 or more at expiration will be automatically exercised for you.
It’s important to note that Fidelity has a risk mitigation process where every account that has an expiring option is reviewed on the expiration date to ensure that exercise or assignment of the expiring contracts in the account can be supported. If exercise or assignment cannot be supported by the account (i.e. insufficient buying power or equity, creating cash debits or short positions in a non-margin account, etc.), Fidelity reserves the right to sell-to-close the option prior to expiration per the terms of our Options Agreement.
We encourage you to take action on expiring positions as soon as possible to avoid a possible liquidation. Communication is typically sent to the secure message center on your Fidelity.com profile the week of expiration as a reminder.
Here’s a link to a great video resource on Fidelity.com: https://www.fidelity.com/learning-center/investment-products/options/monitoring-option-trades-replay
Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read the Characteristics and Risks of Standardized Options (http://www.optionsclearing.com/about/publications/character-risks.jsp). Supporting documentation for any claims, if applicable, will be furnished upon request.
I’m very confused. This is not a option that was expiring today.
And buying to close an option implies that I sold to open them before. Like a covered call.
I would have just let it expire worthless and kept my premium regardless – not buy to close the option at less then the premium .
These options look like the remains of a distribution reverse split
From back in May
Thank you for that additional information. We’d like to take a closer look into your account and the transaction you’re referencing. To do so, please give our phone associates a call at your earliest convenience. They are available 24/7 to assist you.
Contact Us: https://www.fidelity.com/customer-service/contact-us