Exercise Long Call stock option AFTER expiration?

Question

My broker tells me that they can exerrcise a Long Call stock option ON-AFTER expiration if it is In The Money (without my consent). It would NOT require any margin either. What does he mean by this? I would then own 100 shares of the underlying stock shares

Answer 1

An option cannot be exercised after expiration. After expiration the option no longer exists. Remember expiration on stock options is the Saturday following the third Friday of the month.

The Option Clearinghouse Corporation will automatically exercise all options at least five cents in the money at expiration unless the holder of the option gives explicit instructions not to exercise the option. So, if you own a call option that is at least five cents in the money at expiration, and you did not explicitly tell your broker that you did not want the options exercised, the OCC would sell you 100 shares of the stock for 100 times the strike price.

In case you, or someone else reading this, is not familiar the the terminology, a call options is in the money by at least five cents if the stock price is at least five cents greater than the strike price.

The statement "it would NOT require any margin" is a somewhat misleading. As I understand it the transaction will take place even if you do not have enough margin to buy the stock, but that would not stop a margin call from being issued the following Monday requiring you to sell something in your portfolio. And you can be sure you will be charged interest for any margin debt you may incur.