What Happens When Your Option Expires In the Money

Question

OptionProfit · Accepted Answer

If you let an option run all the way to expiration and it finishes in the money, your broker automatically exercises it for you. You don't need to do anything — the system just handles it. But this does mean real shares actually change hands. For a call you own, you'll buy 100 shares per contract at the strike price. For a put you own, you'll sell 100 shares at the strike. If you don't have the cash sitting around or the shares in your account, your broker might close the position for you late in the day, or you can just sell the option before expiration to sidestep the whole thing. If you're on the other side and sold the option, the reverse happens. Your short call gets assigned means your shares get called away at the strike price. A short put getting assigned means you're buying the shares. The easiest way to avoid any surprises is to close or roll an in-the-money option before the market closes on expiration day.