Options Expiration: Automatic Exercise by OCC at $0.01 In-the-Money
Under OCC Exercise-by-Exception rules, what is the minimum amount an equity option contract must be in-the-money at the market close on expiration Friday for the OCC to automatically exercise the contract on behalf of the customer, unless contrary instructions are submitted?
Under OCC rules, any equity option that is in-the-money by at least $0.01 at expiration is automatically exercised unless the holder submits contrary exercise advice.
Complete Analysis & Legal Rationale
The Options Clearing Corporation (OCC) utilizes an 'exercise-by-exception' administrative procedure where any expiring equity option contract that is in-the-money by $0.01 or more will be automatically exercised for the account of the holder, unless the customer specifically instructs their broker-dealer to abandon the option (submitting a Contrary Exercise Advice notice).
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Under OCC rules, any equity option that is in-the-money by at least $0.01 at expiration is automatically exercised unless the holder submits contrary exercise advice.
Fails to reflect correct options pricing/mechanics for B.
Fails to reflect correct options pricing/mechanics for C.
Fails to reflect correct options pricing/mechanics for D.
Official Standard: The Options Clearing Corporation (OCC) utilizes an 'exercise-by-exception' administrative procedure where any expiring equity option contract that is