If you have a long call position on the expiration date after the close, these options will be automatically exercised if they are at least $0.01 in-the-money or more. Your account should have sufficient funds or buying power in advance of the exercise happening. If your account does not have sufficient funds you should sell to close the option prior to the end of the trading day on expiration. The automatic exercise will happen on expiration day by 6:00 PM ET. Alpaca may take action and close the option if your account does not have sufficient buying power to handle the purchase of the underlying stock. However, if Alpaca is unable to close the position, you will be responsible for depositing funds to cover any amount resulting from the automatic exercise. If the options are at-the-money or out-of-the-money they will expire worthless and be removed from your account. The underlying stocks’ official closing price is used to determine whether an option is in-the-money or out-of-the-money.

If you have a long put position that is in the money by $.0.01, the long put may or may not be auto-exercised. If your account has long available shares to cover the exercise deliverables of the put contract, the put will be exercised and the shares will be removed from the account. However, if your account does not have enough available shares to cover the exercise deliverable, and the put is in-the-money, the put contract will either be closed prior the market close or a do not exercise may be placed after the close. For example, if your account is long 100 shares of a stock and you have a covered call written where the shares are securing the call, those shares would not be considered available to sell. In this example the put must be closed prior to the market closing or a do not exercise will be placed on the put.

For further details on option trading at Alpaca, please navigate to our documentation.

For further educational information on Options trading, please refer to: https://www.optionseducation.org/

Options trading is not suitable for all investors due to its inherent high risk, which can potentially result in significant losses. Please read Characteristics and Risks of Standardized Options before investing in options.

All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. There is no guarantee that any investment strategy will achieve its objectives. Please note that diversification does not assure a profit, or protect against loss. There is always the potential of losing money when you invest in securities, or other financial products. Investors should consider their investment objectives and risks carefully before investing.