What’s Collective2’s Policy On Option Expiration?
Let’s say I have 10 calls on stock XYZ with strike price of 50.
Let’s say the stock closed at $57 on option expiration day.
If I failed to take action, will I get $700 X 10 = $7,000 dollars
minus costs, i.e. commissions, in my account, as would
normally happen in a real brokerage account?
Actually, what happens in a real brokerage account depends on whether the option is cash-settled or not. Some options (for example, options on the indexes) are cash-settled. In those cases, it is much as you describe: if you own an option that expires in the money, you receive the net value of the option (if you are short, then the in-the-money amount is taken from your account).
In cases where options are not cash-settled, we will automatically exercise in the money options so that you receive the underlying stock at the strike price of the option you own. Thus, in your example, it will appear in your C2 account that you bought the stock XYZ for only $50 even though it was trading at $57 on expiration day. In theory, you’ll be able to sell the stock for a $7 profit on Monday morning (assuming the price doesn’t change on Monday’s open – not always a sure thing).
So in other words, Collective2 mimics the behavior of a real brokerage account in both cases – whether the option is cash-settled or not.
