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If ACME is at 100 and I sell a 90$ put option for 10$, how likely is it that the option will be exercised if the price is less than the strike price but above (strike - cost)? 85$ For instance?

If he did exercise, I’d want to sell the stock at the same time. Would this be automatic?

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In the US, 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 your option not be auto exercised at expiration. This would make sense if it is ITM by pennies and your commission and/or fees to close the position exceeds the ITM amount.

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The option will certainly be exercised. The $10 cost is already lost to buy the option. Now the person who bought the option has the right to sell an $85 stock to you for $90. They'll certainly do that. That will allow them to make back part of the fee they paid for the option, so they'll end up down just $5 instead of the full $10.

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    It’s more than certain, the broker (ie their computers) will do this automatically. Apr 2 '20 at 12:16

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