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Stock options In-The-Money (ITM) - Execution at the expiring
The Stock options have delivery requirements to be met at the expiring, meaning that in order to be executed and to receive the underlying stocks, the account must reserve the equivalent cost of acquiring the stocks. If this is not matched, the stock option position will be closed usually 2h before expiry.
So two scenarios can occur when Stock options are In-The-Money (ITM):
How the system manage the risk and margin spikes:
When approaching the expiry of a stock options and the option is In-The-Money (ITM) or close to be ITM, our system will start to calculate the costs of acquiring the underlying stocks and reserve the cash accordingly.
More specifically, 2 hours before the expiry, the system will start reserving more and more cash; this to ensure that the cash required acquiring the underlying at the strike price is available at the time of expiry.
The Cash that the risk system reserves is shown in the platform in the Initial Margin Requirement and Maintenance Margin Requirement fields. For this reason, a spike in your Margin Utilization around expiry can be experienced and in certain cases can reach or cross the levels at which normally a stop out would take place, in particular when the account has no sufficient cash available. But this is only a technical setup needed to make sure the account can meet the delivery requirements at the expiry. The account, in fact, will not be stopped based on this and will go back to the normal levels once the expiry is reached, unless other leveraged positions (ex. Forex, CFDs, Futures) are present, which do not match their own margin requirements (usually margin calls notifications will be activated).
You can monitor the quotes of different listed options simultaneously. We display the price curve for call and put options, across different expiries and strikes. Columns are customizable.
Launched from the options chain, this feature offers you a choice of common listed options strategies, such as:
You can change the expiry to another future date.
Rollover is available for listed options from the context menu in the position list.
Click on the show risk graph when building your listed options strategy.
Options are complex financial products, that carry a higher risk and can create rapid and substantial losses. The short selling of options must be enabled by Cornèrtrader, and the investors must understand the related risks.
Complex option strategies such as spreads, straddles, and other multiple-leg options can incur substantial transaction costs, such as multiple commissions, which can affect the return. These option strategies can often involve higher and more complex risks compared to the basic options.
Exercise and assignment of options, especially the American style, can lead to substantial losses, when a writer of the option is "uncovered".
Options expiring in-the- money are subject to automatic exercise, while options out-of-the-money simply expire. In some cases, long OTM options can be exercised if they are very close to the daily settlement underlying price, e.g., "Pin Risk".