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Options FAQ

  • SwitchArrow 1. What happens to my long option on the expiration date?

    Long option positions held at expiration that are “in the money” by $0.01 or more, are automatically exercised by the relevant clearing corporation. “Out of the money” options automatically expire worthless.

    If you hold a long call or put option contract that is at risk of being “in the money”, you must take one of the following actions on the option’s expiration date:

    1. Ensure you have sufficient buying power or the required underlying equity position to afford the automatic exercise.

    2. Sell-to-close (STC) the position by 2 pm ET on the expiration date

    If your option is at risk of being “in-the-money” on the expiration date, please make sure to take one of the above actions. Otherwise, we may (without notice) liquidate these options  on your behalf after 2 pm EST on the expiration date. This action has a $45 service fee attached to it in addition to the regular commissions.

    If we are unable to liquidate your long “in-the-money” option contracts by market close, your options will automatically exercise, and you will be responsible for the securities bought or borrowed as a result. You also assume any market risks associated with these securities and your account may enter a margin call or debit balance as a result.

    For example: If you have a call option automatically exercised on a Friday, shares will be purchased at the strike price, and by next business day (Monday), the market price of the shares could fluctuate.

    In addition, if you have insufficient buying power for automatic exercise, we reserve the right to prevent your “in-the-money” options from being automatically exercised. If your “in-the-money” options are not exercised, any closing value(s) will be lost. That’s why it's important you take action on your own on the expiration date.

  • SwitchArrow 2. What happens to my short option on expiration date?

    If you are holding a short call or put option contract and it is at risk of being assigned (on the expiration date), you must meet one of the following conditions:

    1. Make sure to have sufficient buying power or the required underlying equity position available in your account to afford the assignment.

    2. Buy-to-close (BTC) the position by 2 p.m. ET on the expiration date.

    If your option is at risk of assignment on the expiration date, please make sure to take action.

    Otherwise, we may (without notice) liquidate (buy-to-close) any option contracts exposed to assignment at any time after 2 p.m. ET on the expiration date. This action has a $45 service fee attached to it in addition to the regular commissions.

    If we are unable to close all affected contracts by market close, and your options are assigned, you will be responsible to pay for the securities bought or borrowed as a result of the assignment and your account may enter a margin call or debit balance as a result. You also assume any market risk associated with those securities.

    Please note that short call & put options can be assigned at any time (even if they are out-of-the money). 

  • SwitchArrow 3. When should I use an expire worthless request?

    Long options that are “out-of-the-money” at market close on expiration day will automatically expire worthless. You do not need to enter an “expire worthless” request in this scenario.

    If you are unable to sell your long option position and wish to ensure it does not automatically exercise if it becomes “in-the-money”, you can submit a request to have your option expire worthless.

    “Expire worthless” requests must be submitted before 2 PM EST on the expiration date. To submit your request please log into myQuestrade and follow the below steps:

    Requests Exercise an optionActionExpire worthless

    Questrade reserves the right to liquidate your option even if you have already submitted an “expire worthless” request, especially if the option is part of a strategy.

  • SwitchArrow 4. Why was my put option sold on the expiration date in my registered account?

    Exercising an in-the-money put option will result in selling the underlying shares (typically 100 shares per contact) as part of the process.

    If you don’t own the underlying stock (married put), when the option contracts get exercised, it would result in you having a short position (at the strike price).

    Since the Canada Revenue Agency (CRA) prohibits short-selling in registered accounts, we may choose to either sell the put option position or expire it worthless. However, if you own a married put (long put option and the underlying shares) then your shares will automatically sell at the strike price (as long as your put option is in-the-money on the expiration date).

  • SwitchArrow 5. Why did my “in-the-money” option expire worthless?

    We reserve the right to to prevent your in-the-money long call/put options from being automatically exercised.

    For example: If you have a long in-the-money put option in a registered account on the expiration date, it will require you to enter a short position. Since the Canada Revenue Agency prohibits short-selling in registered accounts, we may prevent you from doing it.

    We may also choose to expire a long in-the-money option (call/put) worthless if you do not have sufficient buying power to exercise the option.  If we expire your option worthless, any closing value of the option will be lost.

  • SwitchArrow 6. What are the unique risks of trading spreads on expiration day?

    Option spread strategies include trading long & short options of the same underlying securities and expiration dates (but different strike prices).

    In a scenario where only one of the legs is “in-the-money” on expiration day, there is a possibility of having an unhedged (unprotected) position in your account. Questrade may take action to close one or more legs to prevent an unprotected position from occurring. To better understand this concept, please refer to the example below:

    Example:

    Vertical call credit spread

    • Short: 3 DIS 15May20 C109.00
    • Long: 3 DIS 15May20 C114.00

    Maximum loss if both legs are in-the-money at expiration: (DIS closes above $114)  difference between strike prices * number of contracts * 100 (option multiplier).

    ($114 - $109) * 3 * 100 = $1,500 USD

    If on the expiration date, DIS closed at $110 (between the strike prices of long and short options), then the long option would be out-of-the-money and will expire worthless and the short leg will end up in-the-money and may get assigned. Here is the margin required for assignment:

    DIS margin requirement (MR) = 30%

    Required margin for assignment: Strike price * number of contracts * underlying MR * number of shares per contract.

    $109 * 3 * 30% * 100 = $9,810 USD

    In this case, the combined USD maintenance excess (ME) in your account should be at least $9,810 USD. If your ME is less than that, Questrade may choose to close the option leg or entire option strategy to mitigate the assignment risk.

    Just because a short option closes out of the money, does not mean it won’t be assigned. Short options can be assigned whether they are in or out of the money and a post market move on the underlying may increase the chances of a short option being assigned even though the underlying closed OTM. 

    Note: If we are unable to liquidate your option position(s) by market close, your option(s) may be automatically exercised or assigned and you will be responsible for the securities bought or borrowed as a result. You also assume any market risks associated with these securities

  • SwitchArrow 7. Why did Questrade liquidate my out-of-the-money option positions?

    We take into consideration the potential automatic exercise or assignment risks. Although the option may have been out of the money at the time of liquidation, market volatility can cause a position to go into the money at any time. This is especially important for short options, where the option can be assigned even if it is out of the money.

  • SwitchArrow 8. Why did my spread take more buying power after 3:00pm ET on expiration day?

    In order to mitigate the assignment risk, all spread orders will take up the maximum margin requirement of the short leg after 3:00 P.M ET.

  • SwitchArrow 9. What is the processing fee if my option gets exercised or assigned?

    The fee is $24.95 per option position that is exercised or assigned.

    For more information, please visit our website.

  • SwitchArrow 10. When will I know if I’ve been assigned/exercised on my expiring option?

    Your positions will be updated the next business day on the trading platform.

    For example: If your option gets assigned/exercised on Friday, you will be able to see it reflected on your trading platform on Monday typically prior to 7:30 A.M. EST (if not a holiday). The account activity page will also show any exercise/assignment in your account. You will be able to see the updates on your account activity page on Tuesday.

    To review your Account activity page please follow the below steps :

    Reports Account activity

  • SwitchArrow 11. What if the underlying stock for my option is halted on expiration day?

    “In-the-money” options may not be automatically exercised on expiration date if the CDCC or OCC excludes them due to a corporate action or when trading of the underlying security is halted.

    If this is the case, to ensure your in-the-money options are exercised, inform us of your intention to exercise them on the expiration date by submitting a request in the Questrade customer portal or by contacting us.

    In this scenario, if you don’t make an explicit request to exercise, your in the money option may expire worthless.

  • SwitchArrow 12. What happens if I enter a short position as a result of exercise/assignment?

    If you enter a short position as a result of an option exercise or assignment, depending on the security, we may begin charging you daily borrow fees.
    You can view borrow fees directly from your trading platform.

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The information contained in this website is for information purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied is made by Questrade, Inc., its affiliates or any other person to its accuracy.

Questrade Wealth Management Inc. (QWM) and Questrade, Inc. are wholly owned subsidiaries of Questrade Financial Group Inc. Questrade, Inc. is a registered investment dealer, a member of the Investment Industry Regulatory Organization of Canada (IIROC) and a member of the Canadian Investor Protection Fund (CIPF), the benefits of which are limited to the activities undertaken by Questrade, Inc. QWM is not a member of IIROC or the CIPF.

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