What should I know when a option will be expired?
1. How to exercise an option?
If the option is out-of-the-money, there is no reason to exercise the option since that you can buy the security cheaper on the open market. On the contrary, if your option is in the money, the broker will automatically exercise them.
Suppose that you have the option named 'AAPL 191214 140.00C' in your account on December 14th, 2019, and the option is in-the-money on that day. In this case, your option will be exercised. After the closing bell of the market, the option in your account will disappear, the $14000 cash will be deducted from your account and the 100 shares of AAPL will appear in your account.
2. Is it possiable that the exercise of an option failed?
If you plan to exercise your option, please ensure that there is enough buying power in your account. Otherwise, based on the principles of risk control, Futu will reserve the right to close the option in-the-money or to close the option nearly in-the-money but actually out-of-the-money, meanwhile Futu will reserve the right to refuse to exercise the option.
On the expiration day of the option, the system will monitor the client's positions. From 3 hours before the closing bell, the system will calculate the account's remaining buying power and the required buying power to exercise the option. If the customer's account risk level was changed into a 'not safe' status, the customer can close some options' positions, and Futu also reserves the right to close the options' positions.
For example, suppose that you have 2 option contract in your account, each option contract authorizes you the right to buy the 100 shares at the predetermined price of $150. On the expiration day, the buying power of your account is $2600. If you want to exercise the option, you need to ensure that your account's buying power is higher than $30000 (=|Option_Quantity|*|Contract_Size|*|Strike_Price|=2*100*$150) at least. If you choose to do nothing and keeping the buying power $2600, Futu will reserve the right to close the option position or the right not to exercise the option.
3. Can I exercise the option early?
For American options, you can exercise the option early. Most traders do not use early exercise for the option they have, they often choose to sell their options on the open market for a high profit. If you want to exercise the option early, please contact us: email@example.com
4. What happens when options get assigned?
If you short(sell) an option that expires in the money, at the same time the option buyer chooses to exercise the option, you will be assigned the stock.
Suppose that Jason has bought an AAPL call option from you, at a strike price of $140. When he chooses to exercise the option, you will need to sell 100 shares of AAPL stock to him for $140/share (the strike price).
Suppose that Jack has bought an AAPL put option from you, at a strike price of $180. When he chooses to exercise the option, you will need to buy 100 shares of AAPL stock form him for $180/share (the strike price).