I'm starting to dabble with options and I bought the March 20 AAPL 330 call option for $5. AAPL is currently trading around $324 today. If I sell the call option today I will make a small profit on my option, but i'm curious what happens if I don't sell the option and it is in the money at the expiration date and I don't have enough money to actually exercise the option. Does it just expire worthless and I basically lost $500?

Is the idea to always plan to sell a call option if you don't plan to actually exercise it?

  • "Is the idea to always plan to sell a call option if you don't plan to actually exercise it?" yes - or let the broker do it for you.
    – D Stanley
    Feb 19, 2020 at 21:30
  • or let the broker do it for you What do you mean by that?
    – Catfish
    Feb 19, 2020 at 21:31
  • 1
    @Catfish some digital brokers have a feature of automatically selling options before expiration. Find it in their settings page or contact their support team. Mar 28, 2020 at 17:58
  • 4
    Does this answer your question? Exercising an option without paying for the underlying
    – Flux
    Jun 20, 2020 at 4:59
  • @Flux yes it does thanks.
    – Catfish
    Jun 22, 2020 at 18:58

2 Answers 2


If your call is OTM at expiration, it will be worthless and it will expire.

If your call is ITM at expiration, it will have some intrinsic value.

If an option is one cent or more in-the-money (ITM) at expiration, the Option Clearing Corp (OCC) will automatically exercise options whether they are long or short. 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 it is not auto exercised at expiration. This would make sense if the option is ITM by pennies and your commission and/or fees to close the position exceeds the ITM amount.

If your call is exercised at expiration and you don't have enough money to covered assignment, you have incurred a freeriding violation and your account will be restricted. Some brokers will automatically close such options just before the close on the day of expiration.

It is always better to sell a long option if it has remaining time premium. The exception to this would be if an ITM option trades below its intrinsic value (and you have the funds available to handle the exercise). Read my answer here.

  • Oh so it will try to excercise even if I don't have enough money to cover and it will get flagged/restricted/etc.
    – Catfish
    Feb 19, 2020 at 23:14
  • 4
    The OCC has no idea whether you have the cash or margin to carry the assigned option. IF your broker isn't proactive and doesn't close your ITM option before automatic exercise then yes, it will be a violation. Feb 20, 2020 at 0:17

When you buy a call option, you need no money to exercise it at maturity. If it is in the money, you will gain S_T-Strike where S_T is the price at maturity. If it is out the money, the option is worthless and there is no need to exercise it.

But, if you are selling a call option, you should be sure to have S_T-Strike at maturity to pay the payoff to your counterparty if the option is in the money.

  • This doesn't seem right. If i only pay $500 to buy 1 call of AAPL 330, there's no way that I don't need any more money to actually buy those 100 shares of AAPL, which would cost $33K at a strike price of 330.
    – Catfish
    Feb 19, 2020 at 22:42
  • Exercising the option typically gives you not the shares, but the price difference between strike and share price. Most options explicitly exclude the possibility to exercise them to really get the share (and most option buyers wouldn't want it)
    – Aganju
    Feb 21, 2020 at 3:21
  • 1
    @Aganju - If it's an American style option (all equities and ETFs), exercising a call gets you the shares (buy) and exercising a put sells the shares. European options (most indexes) settle for cash. If the exercise offsets and closes an existing position in the underlying, you're still getting the shares (long or short). Mar 2, 2020 at 17:01

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