Options Expiration Protocol

Expiring positions are treated differently based on their moneyness and your broker’s guidelines. Learn the options expiration protocol inside the autotrading platform.

The autotrading platform has different protocols for expiring positions based on their moneyness and your broker’s guidelines.

Option Alpha does not close options positions that are out-of-the-money (OTM) on expiration day. Contracts that expire OTM are worthless and you will realize the full loss for long positions or realize the full profit for short positions.

Expired positions

Bots do not support options assignment. For in-the-money (ITM) options positions, the platform will attempt to close the position using normal SmartPricing settings.

The auto-close event beings firing 10 minutes before the market closes. The auto-close event timing is relative to the market close and considers early market closes such as half-days around market holidays.

For examples, the platform will attempt to close an expiring ITM position at 3:50 EST, then at 3:55 EST, and finally at 3:59 EST. If the market closes early on an expiration date, the auto-close event begins 10 minutes before the close.

This forced closing sequence applies to single leg positions that are ITM or spreads that contain a single leg that is ITM.

In addition to forced closures of ITM positions in the platform, your broker may also take action to close a position prior to expiration. Rules for early closure vary between brokerages. 

Generally, early closure rules depend on whether the account has the funds to cover an assignment, whether the position is ITM, OTM, or ATM, and the account type where the expiring position is held. Check with your broker for more information.

If you want to take assignment of an expiring position, you must manually override the position, transfering management from the bot.

Manual override

Learn more about expired positions.

It is important you understand the options expiration protocol of both Option Alpha and your broker, and take the necessary steps to avoid or accept assignment of options positions.

Bots are unaware when an assignment occurs in your brokerage account. The autotrading platform tracks and manages positions independent of the broker. The autotrading platform submits a buy to close or sell to close order and lets the broker perform reconciliation of whether or not the order is valid (overlapping strikes, invalid position quantity, etc.)

The broker reconciles a buy to close or sell to close order against existing positions. Buy to close or sell to close orders do not automatically reverse if the position does not exist (go long or short instead). Instead, the orders will generate an error message. 

If the autotrading platform attempts to close a position that has been assigned, the bot will receive an error message for the closing order, and no action will be taken.

Users must use the broker platform to manage the assigned shares and any remaining option legs.

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