Automatic exercise, and the $0.01 threshold
At expiration OCC exercises every equity option that finishes $0.01 or more in the money, in every account type, unless the holder instructs otherwise. Nobody has to click anything for it to happen. If your short call finishes a cent in the money you are very likely assigned, and if it finishes a cent out you are probably not.
The industry calls it exercise by exception, which is a precise name: exercise is the default and not exercising is the exception you have to ask for.
The threshold
OCC / Options Industry Council, Options Exercise FAQ states it as $0.01 per contract in the money for equity options in customer, firm and market maker accounts alike, and the same penny for index options across all account types. One threshold, no tiers, no discretion.
Applied to a $72.50 strike, it produces a boundary you can draw on a chart.
| Closing print | In the money by | Default |
|---|---|---|
| $72.49 | nothing, one cent out | expires, no assignment |
| $72.50 | nothing, exactly at the strike | expires, no assignment |
| $72.51 | $0.01 | exercised, you are assigned |
| $72.60 | $0.10 | exercised, you are assigned |
A contract that finishes exactly at the strike is not in the money and does not clear the bar. Nine tenths of a cent does not either. The gap between the second and third rows is one penny of stock price and the whole outcome of your trade.
Why "very likely" and not "certainly"
Because the default can be overridden in both directions, by the holder, not by you.
A holder can decline to exercise an in-the-money option. Rare, and usually because exercising would create a stock position they cannot fund or do not want. If that happens on the contract you are short, you simply are not assigned, and you find out by nothing arriving.
A holder can exercise an out-of-the-money option. Also rare, and the reason a penny out of the money is not the same as safe. OCC / Options Industry Council, Options Exercise FAQ keeps the exchange window open until 4:30 p.m. Central, well after the stock market has closed, and the after-hours tape gives a holder new information the closing print does not contain. That is the whole mechanism behind pin risk.
Add OCC / Options Industry Council, Options Exercise FAQ on top: even when every holder behaves exactly as the arithmetic predicts, which of the writers gets the notice is a random draw.
The clock, and whose clock it is
The 4:30 Central cutoff is the exchange's. Your broker's is earlier, sometimes much earlier, and the broker's is the one that binds their customers. It is worth finding yours once, in writing, on a quiet Tuesday.
As a seller you have no instruction to give. The exercise decision belongs to the person holding the contract. Your deadline is the 4:00 closing bell, because the only lever you have is trading, and after 4:00 there is nothing left to trade.
The case where automatic is the wrong default
This one catches people who mostly sell but occasionally buy.
Hold a long call into expiry that finishes in the money and the default is that it gets exercised, which means buying 100 shares per contract. On a $72.50 strike that is $7,250 of stock you have just been signed up for, on a Friday night, whether or not the cash is there.
Brokers handle the shortfall differently. Some sell the contract for you in the final hour rather than let it exercise. Some exercise it and liquidate the shares on Monday, at Monday's prices, which can be worse than the option was worth on Friday. Some do nothing and let the margin department sort it out.
You can head all of it off with a do-not-exercise instruction, or by simply selling the contract before the close, which is what most people should do with an in-the-money long they cannot fund. What you should not do is discover your broker's policy by triggering it.
What a seller should take from this
- In the money by a penny at the bell means assigned. Plan for it during the day rather than hoping into the close.
- Out of the money by a penny means probably nothing, not definitely nothing. Keep an eye on the after-hours print if the strike matters to you.
- You have no say in either. Everything you control happens before 4:00.
- Know your broker's cutoffs and its policy on unfunded exercises before an expiration Friday, not during one.
OptionsKing scores every candidate strike on a deterministic 0 to 100 scale, blends that score with the return on the capital the trade ties up, and shows you the highest-ranked handful. There is no minimum score. How it works covers what the ranking does and does not tell you.
Questions people actually ask
What is the automatic exercise threshold for options?
OCC exercises expiring equity options that finish $0.01 or more in the money, in customer, firm and market maker accounts alike. Index options use the same penny threshold across all account types.
Will an option that closes exactly at the strike be exercised?
Not automatically. A contract finishing exactly at the strike has no intrinsic value, so it does not clear the penny threshold. The holder can still submit an exercise instruction before the cutoff.
Can I tell my broker not to exercise an option?
As the holder, yes. A do-not-exercise instruction overrides the automatic exercise for a contract you are long, subject to your broker deadline. As the writer of an option, you have no instruction to give.
What happens if my long call is exercised and I cannot pay for the shares?
That depends on your broker. Some close the position for you before the bell, some exercise and liquidate the shares on Monday at Monday prices, and some leave it to their margin department. Check the policy before you hold an in-the-money long into expiration.
Sources
Rules and thresholds above were checked against these documents on August 4, 2026. Exchange and broker rules change. Confirm anything you are about to act on with your own broker.
Keep reading
Do the math on your own trade
Every price in this article is an illustrative worked example, not a quote. Read Assignment and expiration for the rest of the series, and the disclaimer before you act on any of it. Selling options carries real risk of loss, and the loss can be far larger than the premium you collected.