Despite all the advances that have been made in automating the deal chain, the practice of exercising and also, I hear, of “abandons” – where in-the-money-options are strangely not exercised – is still an extremely manually intensive process. There are many reasons why this might be the case, including the fact that the exchanges have slightly different rules about automatic exercises and also perhaps because a lot of the options traded are American-style.
No doubt these processes will all be improved but I simply can’t believe that out-of-the-money options not only get exercised but that the deals don’t get cancelled when it happens.
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