Options trading carries risk. You can lose your entire premium if a contract expires worthless, and its value can erode over time as it nears expiration.
Every option contract has an expiration date, and contracts expire at market close (4 PM ET) that day. You can let your contract exercise automatically at expiration, or exercise it early.
Pre-expiration account reviews
On expiration day, Coinbase Capital Markets (CCM) reviews whether your account can support exercise (meaning enough buying power to cover a long call, or enough shares of the underlying stock to deliver for a long put). This begins at 3:00 PM ET, but may happen earlier on days of market volatility
If your account can’t support exercise, CCM may close the position before the market closes to manage risk and prevent an account deficit or a short stock position.
CCM attempts to place orders at fair market value, but orders may fill at an unfavorable price.
If you hold multiple contracts and your account can only support some of them, CCM closes only the unsupported contracts.
If your position is at risk and was not opened on the day of expiration, you’ll receive an email and a push notification.
You can avoid this by selling the contract or making sure your account can support exercise before these reviews are performed.
Automatic exercise at expiration
At the time of expiration, CCM checks whether your contract is in the money or out of the money
In the money: The stock price is at least $0.01 above your call's strike price, or at least $0.01 below your put's strike price (based on the closing price of the underlying stock).
Out of the money: It doesn't meet that threshold.
If your contract is in the money, it’s exercised automatically (even if the gain doesn't cover your premium, resulting in a net loss).
If your contract is out of the money, it expires with no value and no shares change hands.
Exercise a contract early
Exercising a contract early forfeits any value tied to the time remaining until expiration (known as time value). You can only exercise between 4:00 PM and 5:20 PM ET. To request that a contract not be exercised, contact Coinbase support and we'll make a good-faith effort to fulfill the request, but can't guarantee it.
To exercise a contract early:
From your options position, select Exercise.
Review the exercise explainer and select Continue.
Review any applicable warnings, then select Continue.
Confirm the number of contracts, review the total cost or proceeds, then select Review.
Submit your exercise request.
Processing timelines
Exercise and assignment are processed overnight, so it may take some time before your resulting position appears.
You'll receive an email when an exercise is processed, whether automatically at expiration or early. View the details in your transaction history.
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Disclosures
All securities and investments are offered by Coinbase Capital Markets Corp, member FINRA/SIPC. Securities services offered by Coinbase Capital Markets Corp are separate from digital asset services provided by Coinbase Inc., and any affiliates. SIPC does not apply to digital assets or cash held in your Coinbase Inc. or affiliate account. Additional information about your broker, Coinbase Capital Markets Corp, can be found on FINRA’s BrokerCheck (https://brokercheck.finra.org). Execution, clearing and custody of all securities are provided by Apex Clearing Corporation.
Securities and stock options are offered by Coinbase Capital Markets Corp, member FINRA/SIPC. Options trading privileges are subject to application and approval. Options trading involves significant risk and is not appropriate for all investors. For additional margin risks and disclosures, please visit Characteristics and Risks of Standardized Options.
For UK customers, stock trading is offered by CB Payments Ltd (CBPL), which is authorized and regulated by the Financial Conduct Authority (FRN: 1045733). CBPL is authorized to arrange access to Coinbase Capital Markets Corp and Apex Clearing Corporation for execution, clearing, and custody.
This article is for informational purposes only and does not constitute the provision of investment advice. The customer assumes full responsibility for its trading activity and should consult its advisors for its specific situation. This material is not (i) an offer, or solicitation of an offer, to invest in, or to buy or sell, any interests or shares, or to participate in any investment or trading strategy, (ii) intended to provide accounting, legal, or tax advice, or investment recommendations. The information is believed to be current as of the date indicated and may not be updated or otherwise revised to reflect information that subsequently became available or a change in circumstances after the date of publication. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. There is always the potential of losing money when you invest in securities, or other financial products. Investors should consider their investment objectives and risks carefully before investing. Recipients should consult their advisors before making any investment decision.
"Funds" in this article is a generic term and may refer to exchange traded funds (ETFs) and/or mutual funds. Securities products are subject to availability and may change at CCM's discretion. See the most up-to-date information on CCM's product offerings.