I ran into an issue I had never run into before with TD Ameritrade today – I had the appropriate amount of cash available and an option within the strike price to exercise, but it was rejected. Upon calling TD Ameritrade, they indicated that it was rejected because there was time value left on the option and they advised to basically sell the option contracts and buy the stock at the current price. However, if I were to sell and realize the taxable gain from the contracts (about ~$2300) the tax would be higher than the amount of the time premium / theta.
I explained this to TD Ameritrade and they eventually accepted and pushed the exercise through, but I have to say I was blown away because I don't see how it is legal for them to stand in the way of me exercising a contract with my own cash and frankly it is ridiculous that they infantilize the customer to the point that we have to call to ask permission to do this. Has anyone else had a similar experience? I've exercised countless contracts on TD Ameritrade in the past and never run into this before.
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