Looking at the history of one of my option assignments at Schwab, I see:
08/19/2024 as of 08/16/2024 Buy to Close
8/16 is Friday and 8/19 is Monday. If this required use of margin in order to BTC, would I have been charged margin interest over the weekend?
I'm wondering if I made a trade Monday which repaid that margin balance, whether that would still incur margin interest. In other words, would I need to do this trade on Friday, or could I wait until Monday and still avoid margin interest? The settlement time confuses me a bit here.
Thanks!
Friday option assignment and weekend margin interest
byu/ceilingkyet inoptions
Posted by ceilingkyet
1 Comment
8/19/2024 (Monday) as of 8/16/2024 (Friday) means that the option was exercised/assigned on trade date 8/16/2024. However, Schwab did not know about the exercise/assignment until after 8/16/2024. Nevertheless, since the option was exercised/assigned before the option expired, that will be the trade date (as of the next business day).
This makes sense since the owner of the option has to tell his broker to exercise the option. The broker has to tell their clearing firm. Then the clearing firm tells the OCC. The OCC randomly assigns someone short the option. They choose someone short (clearing firm) which then chooses a brokerage firm which chooses a customer. This takes a little time.
Since the trade date is 8/16/2024, the trade would settle on 8/19/2024. If you flatten the position on 8/19/2024, it would settle on 8/20/2024. Thus, you would pay interest for one day on the borrowed balance.