Account holders may monitor this expiration related margin exposure via the Account window located within the TWS. This exposure calculation is performed 3 days prior to the next expiration and is updated approximately every 15 minutes. Note that certain account types which employ a hierarchy structure e. Note that IB generally initiates expiration related liquidations 2 hours prior to the close, but reserves the right to begin this process sooner or later should conditions warrant.
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In addition, liquidations are prioritized based upon a number of account-specific criteria including the Net Liquidating Value, projected post-expiration deficit, and the relationship between the option strike price and underlying. In the event that IB exercises the long call s in this scenario and you are not assigned on the short call s , you could suffer losses. Likewise, if IB liquidates some or all of your spread position, you may suffer losses or incur an investment result that was not your objective.
In order to avoid this scenario, you should carefully review your option positions and your account equity prior to any ex-dividend date of the underlying and you should manage your risk and your account accordingly.
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With the exception of certain futures contracts having currencies as their underlying, IB generally does not allow clients to make or receive delivery of the underlying for physically settled futures or futures option contracts. To avoid deliveries in an expiring contract, clients must either roll the contract forward or close the position prior to the Close-Out Deadline specific to that contract a list of which is provided on the website.
Exchange rules require their broker-dealer members to pay a share of these fees who, in turn, pass the responsibility of paying the fees to their customers. This fee is intended to allow the SEC to recover costs associated with its supervision and regulation of the U. It applies to stocks, options and single stock futures on a round turn basis ; however, IB does not pass on the fee in the case of single stock futures trades. Note that this fee is assessed only to the sale side of security transactions, thereby applying to the grantor of an option fee based upon the option premium received at time of sale and the exerciser of a put or call assignee fee based upon option strike price.
Examples of the transactions impacted by this fee and sample calculations are outlined in the table below. The following page has been created in attempt to assist traders by providing answers to frequently asked questions related to US security option expiration, exercise, and assignment. Please feel free to contact us if your question is not addressed on this page or to request the addition of a question and answer.
How do I provide exercise instructions? What if I have a long option which I do not want exercised?
What can I do to prevent the assignment of a short option? Is it possible for a short option which is in-the-money not to be assigned?
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What happens if I have a spread position with an in-the-money option and an out-of-the-money option? Can IBKR exercise the out-of-the-money long leg of my spread position only if my in-the-money short leg is assigned? What happens to my long stock position if a short option which is part of a covered write is assigned? Am I charged a commission for exercise or assignments? What happens if I am unable to meet the margin requirement on a stock delivery resulting from an option exercise or assignment?
Important Note: In the event that an option exercise cannot be submitted via the TWS, an option exercise request with all pertinent details including option symbol, account number and exact quantity , should be created in a ticket via the Account Management window. In the case of exchange listed U.
Important Note: in certain situations e. In these situations, IBKR will make every effort to provide advance notice to the account holder of their obligation to respond, however, account holders purchasing such options on the last day of trading are not likely to be afforded any notice. If it is in-the-money by at least that amount and you do not wish to have it exercised, you would need to provide IBKR with contrary instructions to let the option lapse.
The only action one can take to prevent being assigned on a short option position is to buy back in the option prior to the close of trade on its last trading day for equity options this is usually the Friday preceding the expiration date although there may also be weekly expiring options for certain classes. When you sell an option, you provided the purchaser with the right to exercise which they generally will do if the option is in-the-money at expiration. While is unlikely that holders of in-the-money long options will elect to let the option lapse without exercising them, certain holders may do so due to transaction costs or risk considerations.
In conjunction with its expiration processing, OCC will assign option exercises to short position holders via a random lottery process which, in turn, is applied by brokers to their customer accounts. It is possible through these random processes that short positions in your account be part of those which were not assigned. Spread positions can have unique expiration risks associated with them. Account holders are ultimately responsible for taking action on such positions and responsible for the risks associated with any unhedged spread leg expiring in-the-money.
There is no provision for issuing conditional exercise instructions to OCC. OCC determines the assignment of options based upon a random process which is initiated only after the deadline for submitting all exercise instructions has ended. In order to avoid the delivery of a long or short underlying stock position when only the short leg of an option spread is in-the-money at expiration, the account holder would need to either close out that short position or consider exercising an at-the-money long option.
If the short call leg of a covered write position is assigned, the long stock position will be applied to satisfy the stock delivery obligation on the short call.
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The price at which that long stock position will be closed out is equal to the short call option strike price. There is no commissions charged as the result of the delivery of a long or short position resulting from option exercise or assignment of a U. You should review your positions prior to expiration to determine whether you have adequate equity in your account to exercise your options. You should also determine whether you have adequate equity in the account if an in-the-money short option position is assigned to your account.
You should also be aware that short options positions may be exercised against you by the long holder even if the option is out-of-the-money. If you anticipate that you will be unable to meet the margin requirement on a stock delivery resulting from an option exercise or assignment, you should either close positions or deposit additional funds to your account to meet the anticipated post-delivery margin requirement.
To protect against these scenarios as expiration nears, IBKR will simulate the effect of expiration assuming plausible underlying price scenarios and evaluating the exposure of each account assuming stock delivery. If the exposure is deemed excessive, IBKR reserves the right to either:. IBKR is under no obligation to manage such risks for you. Clients and as well as prospective clients are encouraged to review our website where fees are outlined in detail. An overview of the most common fees is provided below:.
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Commissions - vary by product type and listing exchange and whether you elect a bundled all in or unbundled plan. Interest - interest is charged on margin debit balances and IB uses internationally recognized benchmarks on overnight deposits as a basis for determining interest rates. For example, in the case of USD denominated loans, the benchmark rate is the Fed Funds effective rate and a spread of 1. In addition, individuals who short stock should be aware of special fees expressed in terms of daily interest where the stock borrowed to cover the short stock sale is considered 'hard-to-borrow'.
Exchange Fees - again vary by product type and exchange. For example, in the case of US securities options, certain exchanges charge a fee for removing liquidity market order or marketable limit order and provide payments for orders which add liquidity limit order. In addition, many exchanges charge fees for orders which are canceled or modified. Market Data - you are not required to subscribe to market data through IB but if you do you may incur a monthly fee which is dependent upon the vendor exchange and their subscription offering. We provide a Market Data Assistant tool which assists in selecting the appropriate market data subscription service available based upon the product you wish to trade.
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Minimum Monthly Activity Fee - as we cater to active traders we require accounts to generate a minimum in commissions each month or be charged the difference as an activity fee. Miscellaneous - IB allows for one free withdrawal per month and charges a fee for each subsequent withdrawal. For additional information, we recommend visiting our website at ww. IB does not have the facilities necessary to accommodate physical delivery.
For futures contracts that are settled by actual physical delivery of the underlying commodity physical delivery futures , account holders may not make or receive delivery of the underlying commodity. It is the responsibility of the account holder to make themselves aware of the close-out deadline of each product. Please note that liquidations will not otherwise impact working orders; account holders must ensure that open orders to close positions are adjusted for the actual real-time position.
To avoid deliveries in expiring futures contracts, account holders must roll forward or close out positions prior to the Close-Out Deadline. Below provides an overview of the relevant close-out deadlines of futures and futures options contracts.
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This information is also available through Account Management. Any date information provided is on a best-efforts basis and should be verified by reviewing the contract specifications available on the exchange's website. End of second business day prior to the First Position Day longs or end of second business day prior to Last Trading Day shorts. End of the fifth business day prior to the Last Trading Day for both longs and shorts. End of the second business day prior to the sooner of First Position Day or Last Trading Day longs or end of the second business day prior to the Last Trading Day shorts.
If there is a resulting futures position, it will then be subject to the respective Close-Out Deadlines, as detailed above.
Also note that this acceleration does not affect options which were converted to cash on or before December 31, which will remain valid series until their original expiration date has been reached. With the exception of certain currency futures contracts carried in an account eligible to hold foreign currency cash balances, IB does not allow customers to make or receive delivery of the commodity underlying a futures contract.
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