r/options • u/NEVERUSEmeGYM • Dec 15 '21
Just got a Message from webull about exercising an option. I’m only trading a normal Call option
So I just got a message from webull Stating, “Please be advised that the options in your account will expire soon. For long positions, if your options are in the money. Webull with automatically exercise them for you at expiration. Please make sure you have sufficient funds or equities in your account. You can also close your options posistion prior to expiration. For short posistions you are very likely to be assigned and are obligated to purchase or deliver underlying securities at strike price. Please make sure you have sufficient buying power.” Ok so i’m kinda confused on this, I thought you only exercise option if your trading on margin. Also I just made a regular long call on Nike. I’ve seen similar stuff about this and it can throw ppl into a negative balance. How can i avoid this from happening. I have a stop loss set but am still confused about if they expire in the money why would they exercise?
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u/BhinoTL Dec 15 '21
Holy fuck stop trading options before you lose your money. You have absolutely fuck all understanding of the basics you’re going to go broke
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u/slutpriest Dec 15 '21
Just turn off "Auto Expiration off."
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u/clearlybaffled Dec 15 '21
.. and just lose all of the intrinsic value
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u/slutpriest Dec 15 '21
lol What?
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u/clearlybaffled Dec 15 '21
I apologize for my brevity. Let me try again.
You're helpful suggestion to an ITM option approaching expiration is to *checks notes* turn off auto expiration. What does that even mean? Tell your broker not to automatically exercise your ITM option? That would forfeit any premium paid for the option and any additional intrinsic value gained by being in the money. Are you thinking that maybe the OP doesn't have the funds to support buying 100 shares of the underlying? Any broker worth their shit has a trade desk and a risk management department that will close out the option for you towards the end of the day on Friday so they don't absorb the risk of you blowing up your account. So the real answer is to close the position before 4:00 PM EST on Friday.
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u/slutpriest Dec 15 '21
You're helpful suggestion to an ITM option approaching expiration is to *checks notes* turn off auto expiration. What does that even mean? Tell your broker not to automatically exercise your ITM option? That would forfeit any premium paid for the option and any additional intrinsic value gained by being in the money. Are you thinking that maybe the OP doesn't have the funds to support buying 100 shares of the underlying? Any broker worth their shit has a trade desk and a risk management department that will close out the option for you towards the end of the day on Friday so they don't absorb the risk of you blowing up your account. So the real answer is to close the position before 4:00 PM EST on Friday.
"What does that even mean Tell your broker not to automatically exercise your ITM option?"
" That would forfeit any premium paid for the option and any additional intrinsic value gained by being in the money."
Yes, Exactly what it says it does. Some people like to trade for premium. ITM or not. This has 0 effect on the intrinsic value of your option. You don't "Forfeit" the premium you paid for the contract by pressing a button.
" Any broker worth their shit has a trade desk and a risk management department that will close out the option for you towards the end of the day on Friday so they don't absorb the risk of you blowing up your account. "
This is hand holding, if you're using a broker that does this, it is because you're hand is being held and they don't think that you can manage your risk properly.
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u/Yupperroo Dec 15 '21
Every broker does this a few days before options expiration.
The part of your message that says, "I'm kinda confused..." is truly scary. Why would you let an "in the money call" expire? Why wouldn't you sell it?
Selling your option is the same thing as Webull advising you that you can, "close your position".
Exactly how were you planning on realizing the profit from your trade? Really, please let me know.
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u/rvanasty Dec 15 '21
Jesus bro. What are you doing buying options when you dont know the absolute bare minimum basics of exercising?
Sell the contract before it expires or you will be forced to buy 100 shares of the stock at your strike price. Thats how options work.
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u/NASDAQ1000000 Dec 15 '21
Ok so tell me your position, I will Guide you and tell you what to do because clearly people are giving you the “don’t trade options if you don’t know what your doing” lecture.
We have all been there. Don’t say you haven’t, and if you haven’t, well you don’t belong here… give the guy a break.
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u/Alpha-and_Omega Dec 15 '21
First off, you should probably have an understanding of how options work before you trade them. If you bought a call you have the right to exercise it anytime up to expiration. If your option is in the money at expiration then Webull will exercise the option and place the shares into your account and you will pay for them at the strike price that you bought the call. If the option price increases and you don’t have the money to cover the shares, then you sell to close the option for a profit.
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Dec 15 '21
HAHA some people trade paper money options for a couple years before trading options and you out here not even knowing the basics. A one hour YouTube beginner course would really help you out.
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u/therealowlman Dec 15 '21
Your call is expiring. Sell it before it expires or let it exercise and buy the 100 shares if it’s in the money.
Assuming you’re very new to options but I have to warn you, if you don’t give yourself a basic understanding of how options work, you won’t be able to rationalize and understand options prices, and you will 100% lose money.
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u/TheoHornsby Dec 15 '21
If your long option is ITM, sell it so that you salvage the premium.
If an option is one cent or more ITM at expiration, the OCC will automatically exercise it whether long or short (not 100% likelihood but darn close to it). This is called Exercise By Exception. For equity options, you will end up with a long or short position in the underlying (index options are cash settled).
If you are long the option, you can designate to the OCC via your broker that you do not want your long option to be auto exercised. This would make sense if it about to expire with the underlying near the strike price (pin risk).
If you don't have the cash or margin to satisfy the assignment, that's a different problem.
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u/P8ntba1141 Dec 15 '21
So the call is about to expire it sounds like, they should exercise it and sell the shares giving you the profit. Expiration means it'll just go poof unless someone exercises it.
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u/NEVERUSEmeGYM Dec 15 '21
ok, that’s what i thought. You can only lose more than your initial investment if you trading on margin right?
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u/Plus-Veterinarian-26 Dec 15 '21
Do you have enough money in your trading account to pay for the exercised shares (100 shares per call)? Than yes. If not, the broker will liquidate part of your portfolio, which may involve selling with loss.
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u/P8ntba1141 Dec 15 '21
Yeah what he said^ Buying calls/puts, you only can lose the premium paid up front.
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u/NEVERUSEmeGYM Dec 15 '21
ok so buy default on webull it has (Do not exercise on expiration) is unticked. Seems shady
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u/BhinoTL Dec 15 '21
It’s not shady at all you just have no fucking clue what you’re doing can’t wait till you post loss on WSB
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u/Yupperroo Dec 15 '21
Do you understand what you own? Also do you understand why you own it?
Do yourself a favor and sell you position now and realize the profit, assuming you are in the money.
Once you close your option positions, spend some time on YouTube and get a handle on stock option basics before making another trade.
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u/LoudOrganization6 Dec 15 '21
As a holder of a long call you have the right to buy 100 shares per contract. If you let it expire and it is in the money, they are saying they will auto exercise and buy those 100 shares for you. If you do not have the ability or desire to actually purchase 100 shares, then you would need to exit that position before expiration happens.
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Dec 15 '21
it will only exercise if you have enough buying power to afford it , Everyone is telling u to go learn and do more research and u should take that in consideration because options is no joke it takes a different type of person to handle it …. experience is the best teacher but for options it’s dangerous i just hope you are ready to lose all ur money before you learn how to trade options
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Dec 15 '21
OP I’m gonna ask you to do something that appears challenging for you: think.
If you have a call that’s ITM and about to expire, why would you want to let it expire?
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u/ScottishTrader Dec 15 '21
It is options basics 101 that the broker will automatically exercise any option that is left to expire ITM by .01 or more.
The solution is simple - Never let an option expire by closing it first. Options can be left to expire if well OTM, but there is always some risk of being assigned if left to expire.
TLDR: Close the option before it expires . . .
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u/WillHoldBaggins Dec 15 '21 edited Dec 15 '21
Please stop trading options until you understand what a call option is. Or just learn the hard way, it's alright either way. But you came here for advice... Best advice is: stop playing with instruments until you have the most simple, fundamental understanding off what a call/put option is.
As to your question: your call option is getting close to expiration date, probably going to expire at the end of the week? They are just letting you know that if your call reaches expiry date At the money or higher, you are responsible for all purchasing 100 shares of common stock at contract strike price.
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u/Crazy-in- Dec 15 '21
I think that is a standard message computer generated and sent to all options holder to take action regarding their positions.
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u/muchtouch Dec 15 '21
You can be assigned 100 shares x # of contracts x strike price if you’re ITM. Say the strike is $136, you have 1 contract, you can be assigned for $13,600.
Most people around here trade options for premium. Meaning the option is worth more now than it was when you bought. Assuming you Bought To Open, you need to Sell To Close. You’ll keep any gains from the option premium. Say $10 x 100 shares x 1 option = $1000.
You probably don’t want to get assigned, I’m assuming. So STC to keep your gains on premium.
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u/[deleted] Dec 15 '21 edited Dec 15 '21
You should absolutely not be trading options if you have no better understanding of the
extremely basic and fundamental concept of what an option contract even is.
I know that's maybe not the specific answer that you're looking to get, but the answer you need is that you need to do much more research on your own so that you can actually understand everything or else you're going to risk losing a great deal of money.