Expiration, Exercise, and Assignment

Unlike a stock, each options contract has a set expiration date. This date figures heavily into the value of the contract itself, as it sets the timeframe for when you can choose to buy, sell, or exercise the contract. Once an options contract expires, the contract itself is worthless.

As the expiration date of your option contract nears, there are a few important things to keep in mind:

• You can’t open a position the day the contract expires. All options contracts are set to position-closing-only status the day before expiration.
• We’ll automatically exercise any option in the money if your account has the required buying power.
• If you don’t have enough buying power to exercise your option, we’ll attempt to sell the contract in the market for you about 1 hour before it expires.
• Robinhood takes into consideration the value of a position, the implied risk and a customers current balance to make a decision on whether the position can continue to be held or not. In some cases, Robinhood believes the risk of holding the position is too large, and will close positions on behalf of the customer.

If your option is in the money, Robinhood will automatically exercise it for you at expiration unless:

• You don’t have sufficient buying power.
• Doing so would result in a short stock position.

If you have a long call about to expire:

• If the contract is in the money or at risk of being in the money, we’ll assess your account to see if you have enough cash to buy the shares.
• If you don’t have enough cash to buy the shares, we’ll attempt to sell the option. For example, if you have 10 contracts, but enough cash to only buy 500 shares, we’ll attempt to sell 5 contracts and allow 5 contracts to be exercised for a total of 500 shares.

If you have a long put about to expire:

• If the contract is in the money or at risk of being in the money, we’ll assess your account to see if you have enough shares to sell.
• If you don’t have enough shares, we’ll attempt to sell the option. If you have 10 contracts and 500 shares, we’ll attempt to sell 5 contracts and allow the remaining 5 contracts be exercised for a total of 500 shares.

If you have a spread about to expire:

• If both legs are in the money, or not at risk of being in the money, we’ll take no action.
• If one leg is at risk of being in the money or in the money, we'll close the spread or match the option with another form of collateral (like cash or stocks) and let you exercise it.

Once your contract expires, we’ll remove it from your home screen. You can view your expired contracts in your account history.

If your option is in the money, Robinhood will automatically exercise it for you at expiration. If you’d like to exercise early, send us a request and we’ll reach out as soon as possible.

Once you exercise an option, you’ll see a card in your home screen letting you know that your option was exercised, and that your associated shares are pending. You’ll also receive an email and push notification before the next trading session, confirming that your option was exercised or assigned, once we receive confirmation from the Options Clearing Corporation.

The cost to exercise? On Robinhood, we don't charge any commission, exercise fees or assignment fees but keep in mind that regulatory fees still apply to shares sold as a result of contracts that are exercised or assigned.

You can exercise the long leg of your spread, purchasing the shares you need to settle the assignment.

Example: You enter a XYZ call spread, so you buy one call contract of XYZ (the long leg) and sell one call contract of XYZ (the short leg).

When you’re assigned, you provide the shares necessary to settle the contract, so your account is now short 100 shares of XYZ. To cover the short position in your account, you can exercise the XYZ call contract you bought and receive 100 shares of XYZ.

You’d sell the long leg of your spread, then separately purchase the shares you need to cover the assignment.

Example: You enter a XYZ call spread, so you buy one call contract of XYZ (the long leg) and sell one call contract of XYZ (the short leg).

When you’re assigned, you sell the shares necessary to settle the assignment, so your account is now short 100 shares of XYZ. You can’t exercise the long leg to cover that position in your account since it’s out of the money. Instead, you sell the call contract you own, then separately buy 100 shares of XYZ to settle the short leg.

In this case, the long leg—the put contract you bought—should provide the collateral needed to cover the short leg. When you exercise the long leg of your spread, you can sell shares to recover the funds you used to settle the assignment.

Example: You enter a XYZ put spread, so you buy one put contract of XYZ (the long leg) and sell one put contract of XYZ (the short leg).

When you’re assigned, you have to buy 100 shares of XYZ and have less funds than before. To recover those funds, you can exercise the XYZ contract you own to sell the 100 shares of XYZ you just purchased, receiving money back from the sale.

You can sell the long leg of your spread, then separately sell the shares you need to cover the assignment.

Example: You enter a XYZ put spread, so you buy one put contract of XYZ (the long leg) and sell one put contract of XYZ (the short leg).

When your short leg is assigned, you buy 100 shares of XYZ, which may put your account in a deficit of funds. You can’t exercise the long leg to cover the deficit in your account since it’s out of the money. Instead, you can sell the put contract you own, then separately sell the 100 shares of XYZ you just received from the assignment to help cover the deficit in your account.