What Happens To Options On The Expiration Date? - CapTrader

Options have a limited term and are no longer tradable after the maturity date. If you have an option in your portfolio beyond the maturity date, this can have different consequences, which we will discuss below.

Exercise of option on expiry date

The price of an option has two components: the intrinsic value and the time value (extrinsic value). At the expiration date, the time value is exactly zero. If the option is in the money, it has an intrinsic value, otherwise it expires worthless.

From the perspective of the option buyer (who has the sole right to decide whether an option is exercised or not), exercising the option on the expiration date only makes sense if it has an intrinsic value.

However, on the expiration date, the option buyer does not have to actively determine whether a purchased option will be exercised. The exchange or the clearing house of the exchange exercises In The Money options automatically. This is intended to simplify trading for all market participants by assuming that the option buyer has an interest in exercising in-the-money options. Thus, there is no risk in case the latter forgets to exercise the option or cannot be present. However, there is also the possibility of communicating a "contrary intention" that prevents exercise.

Long Call

If you hold an in-the-money long call on the expiration date, the underlying is booked long in your securities account at the strike price.

If the long call is out of the money or at the money, it expires worthless and no exercise takes place.

Short Call

If you hold an in-the-money short call on the expiration date, the underlying is booked short into your securities account at the strike price. If you already have the underlying in the corresponding quantity in your securities account, it will be sold.

If the short call is out of the money or at the money, it expires worthless and no exercise takes place.

Long Put

If you hold a long put in the money on the expiration date, the underlying is booked short into your securities account at the strike price. If you already have the underlying in the corresponding number of units in your securities account, it will be sold.

If the long put is out of the money or at the money, it expires worthless and no exercise takes place.

Short Put

If you hold an in-the-money short put on the expiration date, the underlying is booked long into your securities account at the strike price.

If the short put is out of the money or at the money, it expires worthless and no exercise takes place.