Option Exercise with Notifications
Instructions
Use the Option Exercise window (for US options only) to exercise options prior to their expiration date, or to exercise options on Expiration Friday that would normally be allowed to lapse according to clearing house rules.
You can also import a file with instructions, using the Load From File command on the File menu.
To Exercise an Option
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For Mosaic - Click the Account menu in the top left corner and select Option Exercise
For Classic TWS - Click the Trade menu across the top of the page and select Option Exercise
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Select an option to see details, including your current position in the underlying, the current underlying NBBO, and the deadline to submit the exercise instruction.
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Select the option(s) you want to exercise or lapse, and use the Exercise Action field to set up the exercise instruction.
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Choose Exercise Early - All to exercise the entire position.
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Choose Exercise Early - Partial to exercise a portion of the position.
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Choose Lapse (only available on the last trade date).
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The exercise instruction is displayed like an order row. Click “T” to transmit the instruction. To discard without submitting, use the right-click menu and select Discard Modifications.
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The Details window displays when you select a contract, and shows a deadline for submitting the instruction today along with all options positions in the underlying and the accompanying market data.
Configure Final Option Exercise Requests
The Orders page of Global Configuration provides a selection box where you can specify that an option exercise request be final, and therefore cannot be canceled, or editable until the cutoff time (default), which varies by clearing house. Electing "final and cannot be canceled" allows for immediate delivery of the stock in the account. Note that some contracts will not follow this rule and will remain revocable up until the clearing house deadline.
To specify this parameter, from the Mosaic File menu or Classic TWS Edit menu, select Global Configuration and then Orders followed by Settings from the configuration tree on the left side.
Notification of Dividend-Related Early Exercise
Accounts that hold dividend-paying positions that may be affected by early exercise will receive notification via email and in the Option Exercise window in the Optimal Action field approximately two days before the underlying goes ex-dividend
Note: Options in your Watchlist and portfolio that may benefit from early exercise are identified by a yellow lightening icon next to them.
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This information is generated via the IBKR FYI which cannot be disabled.
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Only one notification is sent, but recommendations, if updated, are displayed in the Optimal Action field, and potential benefits (in terms of value saved by closing the position versus value lost by holding the position) are shown in the Total Benefits field. For example, if the recommendation changes or a new position is established after the deadline on (exDiv – 2), no new emails will be sent but the user will see the latest recommendation in the Optimal Action field and potential benefit in the Total Benefits field.
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The system does not make early exercise recommendations when the dividend amount is uncertain, e.g. for ETFs, halted stocks and stocks with other uncertainties.
Display of Short Positions
The Option Exercise window displays actionable Long positions in the top half of the page, and non-actionable Short positions in the bottom half of the window. On ex-div – 1, for all short positions in OCC stocks with dividends, we will project whether the option will be assigned or not.
Note: The system does not make these projections when the dividend amount is uncertain, e.g. for ETFs, halted stocks and stocks with other uncertainties.
Additional Resources
Learn About Options Exercise in Trader Workstation at IBKR Campus