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Options: What would happened if your vertical spread expired ITM?
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Options: What would happened if your vertical spread expired ITM?

  #1 (permalink)
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Options: What would happened if your vertical spread expired ITM?

What would happened if your vertical spread expired in the money?

Example: You sell a APPLE 100/101C vertical spread for $0.50 and the price is at 102 at closed expiration Friday.

Do you just settle the trade for $50, which is the max lost?

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  #3 (permalink)
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It depends on what instructions you have setup and left with your broker for exercise and delivery and rollovers, i.e. if they are instructed to automatically close the spread for you or exercise the assignment on your behalf.

It also depends on if the owner of your short option decides to assign the contract before expiry.

They should offset assuming no early assignment, but I would double check with the broker as to how your instructions are currently setup since I don't know which broker, platform, market (European or American options rules) you are trading.

For reference: here is how they are handled at Interactive Brokers: http://ibkb.interactivebrokers.com/node/190

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