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Understanding Option expiration, exercise, and assignment
Understanding Option expiration, exercise, and assignment
Updated over a week ago

The main ways you can close your Option position(s) is by trading your contract, exercising it, letting it expire, or having your contract assigned.


Buying back a short position or selling a long position is the most common way investors choose to close out of their Option positions, especially if they are in-the-money. Because of the capital required to exercise an Options contract, many choose to close the contract before expiration, allowing them to realize any remaining time value left in the contract, and for those contracts in-the-money, any profits from the increase in the Option's intrinsic value without the need for additional capital or the worry about being short cash or shares.

When can I trade options?

The majority of Options contracts trade Monday - Friday from 9:30am to 4pm ET.

On the day of expiration, you’ll have until 1pm to open a same-day expiring contract, and until 3:30pm to close a same-day expiring contract. At 3:30pm ET, Public will automatically cancel any pending orders for same-day expiring contracts. Additionally, Public may start attempting to close out any same-day expiring positions that are at risk.

To understand at risk positions, refer to the ‘What happens if I don’t have the shares or buying power to exercise?‘ section below.


What does exercise mean?

Exercising essentially means executing your right to buy or sell the underlying equity at the strike price. You can choose to exercise your right any day up to or on the expiration date, which is called “early exercise.” Or, if you don’t take action, your Option contract will be automatically exercised at expiration if it is at least one penny in-the-money—a process referred to as the "exercise by exception" by the Options Clearing Corporation.

What happens if I exercise?

Exercising an Options contract depends on the type of Option you own. If you own a call Option, by exercising the contract, you agree to buy shares at the strike price. If you own a put Option, by exercising, you agree to sell shares you own at the strike price. For example, if you’re exercising a call Option that involves buying $10,000 worth of stock, you’ll need $10,000 in your buying power to complete the trade—even if you plan to immediately sell the stock. For a put Option, you would need to own the shares you are obliged to deliver or else you would wind up short all of those shares and be in a precarious situation, forced to buy them back at a future price.

How do I exercise?

If your Option is in-the-money at expiration - even if only by one penny - your contract will automatically exercise at expiration, except in certain circumstances where Public must get involved to mitigate risk.

You can also exercise your Options early, prior to expiration. To exercise early, reach out to Public’s customer support team either via the Chat or by emailing, who will submit the exercise request on your behalf. Please include:

  • Action statement: “I would like to exercise the following Options:”

  • Followed by:

    1. Contract (Symbol, Strike price, Expiration date, Call/Put)

    2. Quantity you wish to exercise

    3. Your account number

Any exercise requests after 4pm will be automatically queued for the next trading day, unless it’s on the day of expiration. The exercise request is processed overnight, and your position and balances will be updated on the next business day. Coming soon, you’ll be able to directly exercise your Option in the app.

What happens if I don’t have the shares or buying power to exercise?

It is important to remember that contracts at least one penny in-the-money will automatically exercise at expiration. Given this, if you do not have the necessary buying power or shares, it’s important that you attempt to close that position prior to 3:30pm ET on day of expiration. Remember, it is your responsibility to actively manage the risks associated with your Options positions.

At 3:30pm ET on the day of expiration, if your contract is in-the-money and you do not have the necessary buying power or shares, Public will attempt to liquidate the position on your behalf to prevent you from going into a negative debit balance or being short shares. If for any reason we can’t sell your contract, and you don’t have the necessary buying power or shares to exercise the contract, Public may attempt to submit a Do Not Exercise request to the Options Clearing Corporation (OCC).

What is a do not exercise (“DNE”) request?

A DNE request is when you ask the OCC to not exercise your Options contract - having it expire worthless. You may ask Public to submit a DNE request on your behalf, or in certain instances, Public may submit one of your behalf as a last resort. DNE requests are typically used by investors as a last resort after they’ve had other failed attempts to close out their in-the-money long Option position, and do not want the contract to exercise.

To submit a do not exercise request, email with the subject ‘DNE request’ on the day of expiration. In the email, please include:

  • Action statement: “I would like to submit a do not exercise for the following Options:”

  • Followed by:

    1. Contract (Symbol, Strike price, Expiration date, Call/Put)

    2. Quantity you wish to exercise

    3. Your account number

Public’s cut-off time for submitting a do not exercise request on your behalf is 4:30pm ET on the day of expiration. All requests submitted are processed on a best-effort basis. Failure to submit a DNE request before our cutoff time may result in in-the-money contract(s) being exercised automatically.

It’s also important to note that even if you submit a DNE request, your position may still be liquidated on the day of expiration.


What is expiration?

Each Option contract comes with an expiration date that is determined at the creation of the contract itself. An Option’s expiration date is the last day you can exercise your right to buy or sell the underlying stock at the agreed-upon strike price. If you hold your contract until expiration, and it is either out-of-the-money or in-the-money but you submitted a DNE, the Option will expire worthless. Or in other terms, after the expiration date, the Option contract becomes null and void (has zero value) and is no longer tradeable.

How would my contract expire?

Contracts typically expire in two scenarios. The first, if you (or in select circumstances, Public) submit a do not exercise request. Or, the second, when a contract becomes essentially worthless - the open interest and price drop close to 0.


What does assignment mean?

Assignment refers to the obligation of an Option seller to fulfill the contract's terms when the option holder, or buyer, chooses to exercise their right. Option sellers are often referred to as option writers, or being short the contract.

When an option holder chooses to early exercise, what are the steps to assignment?

  1. Decision to exercise: Option holders may choose to exercise early when market conditions align, potentially fearing a reversal in stock prices that could erode profits, or wanting to capitalize on an upcoming dividend.

  2. Initial notification: The Options Clearing Corporation is informed upon early exercise, randomly assigning a brokerage client who is short a matching Option.

  3. Assignment notification: The short Option holder is notified by their brokerage about being assigned and is now responsible for meeting the Option contract's terms.

  4. Fulfilling the obligation: Option writers must deliver the underlying asset for call Options or pay for the underlying asset for put Options. This is typically an automated process carried out by brokerages.

Aside from early exercise, when else can assignment happen?

As an Option writer, there is risk of assignment up until expiration. This is because any Option contract that is in-the-money at the time of expiration will be automatically exercised, even if it is only in the money by $0.01, unless the Option owner specifically requests to have it not exercised.

Can you provide an example of an assignment?

Let’s take a basic example. Say you've sold a call Option on FlyFit at $50, and sometime after the stock rises to $60. Seeing this favorable condition, a person who bought an Option with the same conditions decides to exercise their right to buy FlyFit shares at $50.

This triggers a notification to the Options Clearing Corporation, which randomly selects a member brokerage, who then randomly nominates you as the Option writer, as you’re short this specific type of contact.

From there, we’ll get in touch and notify you that you’ve been assigned and are now responsible for delivering FlyFit shares at the agreed $50 strike price to the Options holder. In exchange for delivering the shares, you will be paid $50 per share from the Options holder.

When am I at risk of assignment?

Selling Options always carries the possibility of assignment, which is particularly risky if you lack the necessary shares or capital. Preparedness is crucial to navigate potential challenges.

As an investor, you can mitigate assignment risks by buying to close out your positions well before expiration, particularly if the Option is approaching an in-the-money status, providing more control and potential savings.

Additionally, it is important to pay attention to a company’s earnings and dividend dates, as during those times, the risk of assignment may be heightened.

For further questions contact Member Support via in-app chat or email at

Options carry significant risk and are not suitable for all investors. Options investors can rapidly lose the value of their investment in a short period of time and incur permanent loss by expiration date. Certain complex options strategies carry additional risk. There are additional costs associated with option strategies that call for multiple purchases and sales of options. Supporting documentation for any claims will be furnished upon request. Prior to buying or selling an option, investors must read and understand the “Characteristics and Risks of Standardized Options,” which can be found at: See full terms of the Options Order Flow Rebate Program at Rebate rates are subject to change for new and existing enrollees.

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