Automatic Exercise

A procedure whereby the Options Clearing Corporation (OCC) attempts to protect the holders of certain in-the-money expiring options by automatically exercising the options on behalf of the owner. The OCC will automatically exercise any expiring equity call or put in a customer account that is $0.01 or more in-the-money, and any index option that is $0.01 or more in-the-money. It’s important to keep in mind that a particular brokerage’s threshold for automatic exercise may or may not be the same as the OCC’s.