Automatic Options Expiration Update

The Options Clearing Corporation (OCC) is the company responsible for processing US stock options. Options are processed, if they are exercised by the options holder (the trader that is long the options), or if they are in the money (in profit) when they expire.

As of the upcoming expiration (Friday, June 20th), the OCC is changing the threshold at which US stock options are automatically exercised. Up until now, only options that were at least $0.05 in the money were automatically exercised, but from now on, all options that are at least $0.01 in the money will be automatically exercised. If a trader is long in the money options, but does not want them exercised, they will need to inform the OCC via whatever facility their brokerage provides for this purpose (e.g. IB traders can inform the OCC via TWS).

Something to be aware of if you have any US stock options that could expire between $0.01 and $0.05 in the money, is that you will need enough margin in your trading account (specifically maintenance margin) to cover the resulting stock position, otherwise, your brokerage may automatically exit the position for you in order to remove the margin requirement.

If you would like to know more about options, exercising options, or options expirations, additional information can be found in the options trading articles.