Allocation Notice
Definition of 'Allocation Notice'An official notification from an options clearing firm to the writer of an option that the current option holder has exercised and, therefore, the writer must produce the underlying security. This may require the option's writer to purchase or sell securities on the open market to fulfill the contractual obligation.Allocation notice can also refer to how a broker or advisor would inform a client who has shown interest in an IPO whether his or her requested allocation of IPO shares is available in full, or if only a fraction of the requested total is available for purchase. |
|
Investopedia explains 'Allocation Notice'Because such a high percentage of options expire worthless, investors tend to overlook the fact that every contract can be exercised by the current holder. While most options traders avoid holding their contracts at expiration, someone will always be holding the in-the-money options, and will call upon the writer of the option to deliver the goods.For example, if an owner of a large block of stocks has been writing covered calls to generate income, and the stock has appreciated enough to make the option exercise profitable, whoever is holding the contract at expiration will call on the stockholder to deliver the shares through his or her brokerage firm. |
Related Definitions
Articles Of Interest
-
Cut Down Option Risk With Covered Calls
A good place to start with options is writing these contracts against shares you already own. -
5 Tips For Investing In IPOs
Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters. -
How can I find out which stocks also trade as options?
The trading of options has become increasingly popular among retail investors as they become aware of the many different ways that options can be used to generate large profits. The interesting ... -
6 Asset Allocation Strategies That Work
Your portfolio's asset mix is a key factor in whether it's profitable. Find out how to get this delicate balance right. -
American Vs. European Options
These two options have many similar characteristics, but it's the differences that are important. -
Pay Attention To The Proxy Statement
Don't overlook this overview of a company's well-being. -
How Risk Free Is The Risk-Free Rate Of Return?
This rate is rarely questioned - unless the economy falls into disarray. -
An Introduction To Gamma-Delta Neutral Option Spreads
Find the middle ground between conservative and high-risk option strategies. -
Shopping For A Financial Advisor
Finding your perfect advisor is as simple as shopping for a car. Read on to learn more. -
Nobel Winners Are Economic Prizes
Before you try to profit from their theories, you should learn about the creators themselves.
Free Annual Reports