The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to be answering a user question or a member question which is – “What happens to deep in the money option spreads at expiration?” The question really comes out of this idea of – Well, if I have a spread and the spread is deep in the money… Let’s say I’ve sold a call spread and the stock has rallied well beyond my call spread strikes, both the short strike and the long strike. If I let it go to expiration, what happens? And so, if you do let the spread go all the way to expiration and then go through the expiration process, you will be assigned on your short option contracts and the broker will assume automatic exercise of your long option contracts. Now, this should result in basically no stock to you at the end of the day because you are assigned stock on one end and you are let’s say buying stock on the other end and so, that should equal each other out. As long as you have the same number of contr