When a long option automatically exercises

In-the-Money (ITM) Options Automatically Exercise

The Options Clearing Corporation (OCC) will automatically exercise any expiring options that close in-the-money by at least $0.01.


That means if you purchased an XYZ $50 strike call and the stock closes at $50.01 or higher at expiration then 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 it expires at $49.99 or lower at expiration then 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 do not want to exercise a long option contract that would automatically exercise, then you need to provide tastyworks with such a request by 3:30 PM Central. DNE's can be made via email to our Trade Desk (tradedesk@tastyworks.com).


When does a long option 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 you need to provide our Trade Desk (tradedesk@tastyworks.com) with an exercise request by 3:30 PM (Central, Chicago time).


A note about after-hours price action

Price action during the after-hours trading session (after the close) does not determine whether an option is no longer in or out-of-the-money. 


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 out-of-the-money, then your long option will still auto-exercise. If this occurs, then you may place a "Do Not Exercise" (DNE) request by reaching out to our Trade Desk.