InterDigital Inc (IDCC)

[matt2237]

Exercise of any publicly traded option requires instructions from the account holder to their broker unless the account holder has signed a discretionary trading authorization for his broker.

Think about this...if a broker arbitrarily exercised 10 contracts of the June 30 calls this Friday after the close (and let's just say for this example that IDCC closed at $30.12...the client couldn't get them sold or forgot about them!!). The broker would then be buying 1000sh @ $30sh = $30,000 for his client. His client may or may not be able to come up with that amount or the margin for it. The broker doesn't have the obligation to nor does he have the right to make this transaction without client authorization.

To carry the illustration further...what if a broker did just this and come Monday morning IDCC for some reason opens at $27sh...who would "eat" that $3000 loss (if not exercised on Friday the client would've had the opportunity to buy at $27 on Monday OR he would be forced to sell stock that he didn't want at a $3000 loss).

Now, certainly a lot of broker/client relationships are very lax and informal. AND after years and years of building a working relationship a client may be supportive of a broker who he knows is looking out for his best interest. But it can also work the other way...especially when it comes to losing money.

DRC