If a long stock option or index option finishes Out of the Money it will not be auto exercised by the Option Clearing Corp (OCC) and the long option will expire worthless. For non-U.S. options, please refer to the Options Exercise page of our website for information on how the different clearinghouses will handle the exercise. A closing transaction will be in your Trade Confirmation Report and in your Activity Statement's Trades section with a Code "Ep" for Expired. An owner of a long option can still manually enter exercise instructions for an expiring Out of the Money option until 17:25 ET (16:25 CT) (see the Options Exercise website page for non-U.S. options). When exercising a long Out of the Money option the account will pay an additional amount of money equal to the difference between the option's strike price and the OCC's official close price (or final settlement price in thr case of index options) multiplied by the contract multiplier and number of contracts.
As for an expiring Out of the Money short stock option or index option it will also have a closing transaction will a Code "Ep" for Expired. While it is unlikely that holders of expiring "Out of the Money" long options will elect to enter manual exercise instructions it is a possibility and you may still be assigned even if your short option is Out of the Money. Always monitor your account's position and Trade Confirmation Report after the overnight update to see what options were assigned, exercised or expired in your account.
Additional Information
- U.S. Securities Option Expiration in our Knowledge Base.
- Margin policy for expiring options in our Knowledge Base.