I have a question – if a contract goes ITM for ex a 25C expiring end of week for GME. Is it possible that I’m not able to sell to close it because it’s too expensive and I have to exercise it or if it’s ITM and the market closes I have to exercise it and then I’m short of funds and not sure what happens after that but can anyone explain this scenario?
Options expire ITM – do I have to exercise if market closes? Can I sell to close if too expensive?
byu/usd97 inoptions
Posted by usd97
4 Comments
If that contract expires in the ITM by 1 cent then it will automatically get exercised against you. That why it’s imperative to make sure you are aware of the underlying at the end of the contract expiration. However, if the contract is ITM and your contract value has risen, then you can sell that contract back anytime for a profit. Everyday you hold that contract and it’s not ITM or ITM theta and IV will corrode the value of your contract.
You’d probably want to sell before market close. Depending on your brokerage they may automatically sell it for you if you don’t have the funds to exercise, or they may exercise it for you and you’ll temporarily have an account deficit. I don’t know what you mean by ‘too expensive to sell’, as if it is ITM, there will be buyers.
If you bought an option, you have the right but not the obligation to exercise that option.
If the option expires ITM, you can still contact your broker and have them put in a Do Not Exercise order. Most brokers give you about 30-60 minutes after the market closes on expiration day. A couple brokers have this as an option right in the platform.
If you do this, it’s the same as if the option expired worthless. There is no way to sell it after the market closes.