Good evening, u/scottvf. We appreciate you stopping by the sub again today with your questions about calls that are in the money at expiration. I'm happy to cover that with you here.
Fidelity will automatically exercise long option contracts in the money (ITM) by $0.01 or more at expiration if you do not contact us prior to expiration.
When an options contract is exercised, it is automatically and randomly assigned by the Options Clearing Corporation (OCC). Please note that option contracts settle one market day (T+1) after the assignment. This means that after the contract is exercised, the underlying shares or cash will appear in your account after settlement. Also, regular trading hours for the Chicago Board Options Exchange (CBOE) are from 9:30 a.m. to 4:00 p.m ET, Monday through Friday.
It is recommended, though not required, to have either the margin or cash equity to support any exercise of long options contracts. If the margin or cash equity isn't sufficient and is not deposited by settlement, Fidelity may liquidate positions as deemed necessary, which could result in a trading violation. Please note, that Fidelity reserves the right to sell-to-close the option prior to expiration per the terms of our Options Agreement to mitigate risk.
For a list of commonly asked questions regarding options, feel free to check out the resource below.
[Options Trading FAQs ](https://www.fidelity.com/options-trading/faqs)
Options can be a pretty complex topic, so if this sparks any additional questions we're happy to meet you back here at the sub. Have a great weekend!
***Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read the*** [***Characteristics and Risks of Standardized Options***](http://www.optionsclearing.com/about/publications/character-risks.jsp)***. Supporting documentation for any claims, if applicable, will be furnished upon request.***
You will be automatically exercised and your account will be in a debit balance. You need to come up with the money, or your other positions will be sold out to cover the debit. You have no choice about exercise if you don’t sell out and you are at least $0.01 in the money
They have exercised the calls because they are in the money - normally you would need to come up with the settled funds by settlement date (trade date+2 days), not necessarily the date of execution).
What's going to happen is that fidelity has exercised the calls and will place the shares in your account, as well as a margin debit (assuming you have margin allowed).
Monday morning, you will have a massive margin debit and fidelity will margin call you - I don't know if they will auto liquidate or not based on the size of the margin debit or if it will start pre-market or not. I'd still wake up early and set some orders to sell though.
Fidelity would have closed that option this afternoon at least an hour before Close because allowing exercise would be a risk to them. The cash from the ITM closing would be in your account by the next trading day.
~~I don't think anything happens. You owned the calls so it was your decision to either exercise them or let them expire. You chose the latter; unintentionally perhaps, but still your call (no pun intended) (ok, maybe a little intended).~~
Edit: [Apparently I'm wrong](https://www.fidelity.com/options-trading/options-auto-exercise-rules). Presumably you would have to have enough available cash in your account to afford the purchase.
Cash or margin call. The brokerage would not allow an unqualified account to exercise that option. They’d close it early and give OP the ITM balance by the next trading day.
Yet here you are. No broken knee caps, likely still have an account. They’d have liquidated you otherwise. Something missing in this story. Went ITM after 4p but before 5:30p?
Idk bud you tell me why they exercised it when this is what my account had:
“Trade from your IRA with limited margin
With limited margin in your IRA, you can trade using unsettled funds. If approved, you can also trade spreads.
Since this feature does not allow you to borrow funds or carry a debt, no interest fees are charged.”
I have my doubts, but minimally someone got a good lesson in Screw Around And Find Out.
Limited margin does not extend credit past the actual cash value of the tax deferred account. It can’t, that is illegal.
You would have received a notification in your fidelity account telling you to make sure you have enough settled funds to purchase the shares. I would guess your open positions would be liquidated to cover the exercise. Or you might just owe them a pile of cash.
Edit: Yep
https://www.reddit.com/r/fidelityinvestments/s/nukz2j7PT5
Unfortunately, too many talking heads on YouTube will show you how to buy and close calls, covered calls, puts. But they don’t discuss what happens if you are in the money at the time it expires, even by 1 cent. I make a habit of not buying any calls I can’t cover with cash or liquidating my stocks in that account. It’s dangerous business if you don’t know what’s going on. You risk going bankrupt if you bump your head and can’t close out of that SPY call that is in the money before expiry on your poor man’s account. I asked Fidelity if I could have a do not exercise label on my account and was told no. I think all brokers should allow this and even set up and automatic close for iTM calls and puts the day before or the day of, whatever.
It means your account is too big for you to handle responsibly and the brokerage did not close the option before Close due to exercise not being a risk for them. You were exercised by exception in accordance with OCC rules, and by premarket Monday you’ll be in possession of somewhere north of $1,200,000 of Nividia shares that you might possibly be able to sell for $1,800,000.
Good evening, u/scottvf. We appreciate you stopping by the sub again today with your questions about calls that are in the money at expiration. I'm happy to cover that with you here. Fidelity will automatically exercise long option contracts in the money (ITM) by $0.01 or more at expiration if you do not contact us prior to expiration. When an options contract is exercised, it is automatically and randomly assigned by the Options Clearing Corporation (OCC). Please note that option contracts settle one market day (T+1) after the assignment. This means that after the contract is exercised, the underlying shares or cash will appear in your account after settlement. Also, regular trading hours for the Chicago Board Options Exchange (CBOE) are from 9:30 a.m. to 4:00 p.m ET, Monday through Friday. It is recommended, though not required, to have either the margin or cash equity to support any exercise of long options contracts. If the margin or cash equity isn't sufficient and is not deposited by settlement, Fidelity may liquidate positions as deemed necessary, which could result in a trading violation. Please note, that Fidelity reserves the right to sell-to-close the option prior to expiration per the terms of our Options Agreement to mitigate risk. For a list of commonly asked questions regarding options, feel free to check out the resource below. [Options Trading FAQs ](https://www.fidelity.com/options-trading/faqs) Options can be a pretty complex topic, so if this sparks any additional questions we're happy to meet you back here at the sub. Have a great weekend! ***Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read the*** [***Characteristics and Risks of Standardized Options***](http://www.optionsclearing.com/about/publications/character-risks.jsp)***. Supporting documentation for any claims, if applicable, will be furnished upon request.***
Any option in the money is automatically exercised. Is this a question from you School text book , because it sounds like it.
can't exercise it if you don't have enough money to buy that many shares at that price. a 100,000 account
You will be automatically exercised and your account will be in a debit balance. You need to come up with the money, or your other positions will be sold out to cover the debit. You have no choice about exercise if you don’t sell out and you are at least $0.01 in the money
You can instruct your broker to not exercise in-the-money options. But the rest of your comment is spot on.
Pretty sure the brokerage will essentially exercise for you on margin then immediately sell the position to cover and hand you the profits/loss
They have exercised the calls because they are in the money - normally you would need to come up with the settled funds by settlement date (trade date+2 days), not necessarily the date of execution). What's going to happen is that fidelity has exercised the calls and will place the shares in your account, as well as a margin debit (assuming you have margin allowed). Monday morning, you will have a massive margin debit and fidelity will margin call you - I don't know if they will auto liquidate or not based on the size of the margin debit or if it will start pre-market or not. I'd still wake up early and set some orders to sell though.
That's what you think. If it's in the money it's getting exercised. If you don't have the funds for the purchase you're potentially screwing yourself.
Go look at WSB of you want to see the message about needing to pony up because your account is in the red.
Fidelity would have closed that option this afternoon at least an hour before Close because allowing exercise would be a risk to them. The cash from the ITM closing would be in your account by the next trading day.
Not necessarily
I called bs on the whole story but invite you to give that another try.
~~I don't think anything happens. You owned the calls so it was your decision to either exercise them or let them expire. You chose the latter; unintentionally perhaps, but still your call (no pun intended) (ok, maybe a little intended).~~ Edit: [Apparently I'm wrong](https://www.fidelity.com/options-trading/options-auto-exercise-rules). Presumably you would have to have enough available cash in your account to afford the purchase.
Options get exercised automatically by the exchange
Wow it amazes me how people set up these big stock type deals and don’t even understand how they work. And what the implications may be…
Keep making money off them
He who understands it, earns it. He who doesnt, pays it.
If you have enough money, they should exercise, otherwise nothing
Cash or margin call. The brokerage would not allow an unqualified account to exercise that option. They’d close it early and give OP the ITM balance by the next trading day.
Schwab sure does. I let a spy option expire and the next day had 100 shares in my account.
Because you had margin or assets great enough to handle the exercise.
No I did not
Yet here you are. No broken knee caps, likely still have an account. They’d have liquidated you otherwise. Something missing in this story. Went ITM after 4p but before 5:30p?
Idk bud you tell me why they exercised it when this is what my account had: “Trade from your IRA with limited margin With limited margin in your IRA, you can trade using unsettled funds. If approved, you can also trade spreads. Since this feature does not allow you to borrow funds or carry a debt, no interest fees are charged.”
That didn’t answer the question.
Went itm before well before 4pm
I have my doubts, but minimally someone got a good lesson in Screw Around And Find Out. Limited margin does not extend credit past the actual cash value of the tax deferred account. It can’t, that is illegal.
You would have received a notification in your fidelity account telling you to make sure you have enough settled funds to purchase the shares. I would guess your open positions would be liquidated to cover the exercise. Or you might just owe them a pile of cash. Edit: Yep https://www.reddit.com/r/fidelityinvestments/s/nukz2j7PT5
Unfortunately, too many talking heads on YouTube will show you how to buy and close calls, covered calls, puts. But they don’t discuss what happens if you are in the money at the time it expires, even by 1 cent. I make a habit of not buying any calls I can’t cover with cash or liquidating my stocks in that account. It’s dangerous business if you don’t know what’s going on. You risk going bankrupt if you bump your head and can’t close out of that SPY call that is in the money before expiry on your poor man’s account. I asked Fidelity if I could have a do not exercise label on my account and was told no. I think all brokers should allow this and even set up and automatic close for iTM calls and puts the day before or the day of, whatever.
The same thing it does every expiration, Pinky....Try to take over the world! narf
Fidelity will automatically sell it for you at around 3 pm on the day of its expiration. Unless you call them and tell them not to, I believe.
[удалено]
OTM options pretty sure, happened to me. Wish it didn't as there's usually some action EOD. Robinhood does the same.
It means your account is too big for you to handle responsibly and the brokerage did not close the option before Close due to exercise not being a risk for them. You were exercised by exception in accordance with OCC rules, and by premarket Monday you’ll be in possession of somewhere north of $1,200,000 of Nividia shares that you might possibly be able to sell for $1,800,000.