When a long option automatically exercises
In the Money (ITM) Options Automatically Exercise
The Options Clearing Corporation (OCC) will automatically exercise any expiring equity/ETF option(s) that close in the money by at least $0.01.
For example, if you purchased an XYZ $50 strike call and the stock closes at $50.01 or higher at expiration, the call will automatically exercise, and the account will be long +100 shares @ $50. On the other hand, if you purchased an XYZ $50 put and the stock closes at $49.99 or lower at expiration, the put will automatically exercise, and the account will be short -100 shares at $50.
Equity and ETF options are ITM or OTM based on the last price (close price) at expiration.
Do Not Exercise Requests (DNE)
If you have a long option that expires ITM and do not want it to exercise automatically, you need to provide tastyworks with a DNE request by 3:30 PM Central. To learn how to request a DNE, please click here.
When a long option does not automatically exercise
Out of the Money (OTM) & At the Money (ATM) options
The OCC will not automatically exercise expiring options that close OTM or ATM. You may choose to exercise your long option but must reach out to our Trade Desk. To learn more about exercise requests, please click here.
In order to take on automatic exercise of a long option, your account must have the funds necessary to cover the requirements for the shares, if not, then your expiring options may be closed by our risk management team. To find out more on our expiration risk procedures, please visit this link here.
Disclaimer about after-hours price action
The after-hours price action does not determine whether an option is no longer in or out-of-the-money on the expiration day.
If you are long an option that expires OTM based on the last price, but due to after-hours price action it goes ITM, then you can still submit an exercise request. You must inform our Trade Desk by 3:30 PM (Central, Chicago time). Your account will need enough buying power to request an exercise.
On the other hand, if your option expires ITM, but due to after-hours price action it goes OTM, then your long option will still auto-exercise. If this occurs, then you may request a Do Not Exercise (DNE) request by reaching out to our Trade Desk before the cutoff time.