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Options Exercise, Assignment, and More: A Beginner's Guide

So your trading account has gotten options approval, and you recently made that first trade—say, a long call in XYZ with a strike price of $105. Then expiration day approaches and, at the time, XYZ is trading at $105.30.

Wait. The stock's above the strike. Is that in the money 1 (ITM) or out of the money 2  (OTM)? Do I need to do something? Do I have enough money in my account? Help!

Don't be that trader. The time to learn the mechanics of options expiration is before you make your first trade.

Here's a guide to help you navigate options exercise 3 and assignment 4 —along with a few other basics.

In the money or out of the money?

The buyer ("owner") of an option has the right, but not the obligation, to exercise the option on or before expiration. A call option 5 gives the owner the right to buy the underlying security; a put option 6  gives the owner the right to sell the underlying security.

Conversely, when you sell an option, you may be assigned—at any time regardless of the ITM amount—if the option owner chooses to exercise. The option seller has no control over assignment and no certainty as to when it could happen. Once the assignment notice is delivered, it's too late to close the position and the option seller must fulfill the terms of the options contract:

• A long call exercise results in buying the underlying stock at the strike price.
• A short call assignment results in selling the underlying stock at the strike price.
• A long put exercise results in selling the underlying stock at the strike price.
• A short put assignment results in buying the underlying stock at the strike price.

An option will likely be exercised if it's in the option owner's best interest to do so, meaning it's optimal to take or to close a position in the underlying security at the strike price rather than at the current market price. After the market close on expiration day, ITM options may be automatically exercised, whereas OTM options are not and typically expire worthless (often referred to as being "abandoned"). The table below spells it out.

• If the underlying stock price is...
• ...higher than the strike price
• ...lower than the strike price
• If the underlying stock price is... A long call is... -->
• ...higher than the strike price ...ITM and typically exercised -->
• ...lower than the strike price ...OTM and typically abandoned -->
• If the underlying stock price is... A short call is... -->
• ...higher than the strike price ...ITM and typically assigned -->
• If the underlying stock price is... A long put is... -->
• ...higher than the strike price ...OTM and typically abandoned -->
• ...lower than the strike price ...ITM and typically exercised -->
• If the underlying stock price is... A short put is... -->
• ...lower than the strike price ...ITM and typically assigned -->

The guidelines in the table assume a position is held all the way through expiration. Of course, you typically don't need to do that. And in many cases, the usual strategy is to close out a position ahead of the expiration date. We'll revisit the close-or-hold decision in the next section and look at ways to do that. But assuming you do carry the options position until the end, there are a few things you need to consider:

• Know your specs . Each standard equity options contract controls 100 shares of the underlying stock. That's pretty straightforward. Non-standard options may have different deliverables. Non-standard options can represent a different number of shares, shares of more than one company stock, or underlying shares and cash. Other products—such as index options or options on futures—have different contract specs.
• Stock and options positions will match and close . Suppose you're long 300 shares of XYZ and short one ITM call that's assigned. Because the call is deliverable into 100 shares, you'll be left with 200 shares of XYZ if the option is assigned, plus the cash from selling 100 shares at the strike price.
• It's automatic, for the most part . If an option is ITM by as little as $0.01 at expiration, it will automatically be exercised for the buyer and assigned to a seller. However, there's something called a do not exercise (DNE) request that a long option holder can submit if they want to abandon an option. In such a case, it's possible that a short ITM position might not be assigned. For more, see the note below on pin risk 7 ?
• You'd better have enough cash . If an option on XYZ is exercised or assigned and you are "uncovered" (you don't have an existing long or short position in the underlying security), a long or short position in the underlying stock will replace the options. A long call or short put will result in a long position in XYZ; a short call or long put will result in a short position in XYZ. For long stock positions, you need to have enough cash to cover the purchase or else you'll be issued a margin 8 call, which you must meet by adding funds to your account. But that timeline may be short, and the broker, at its discretion, has the right to liquidate positions in your account to meet a margin call 9 . If exercise or assignment involves taking a short stock position, you need a margin account and sufficient funds in the account to cover the margin requirement.
• Short equity positions are risky business . An uncovered short call or long put, if assigned or exercised, will result in a short stock position. If you're short a stock, you have potentially unlimited risk because there's theoretically no limit to the potential price increase of the underlying stock. There's also no guarantee the brokerage firm can continue to maintain that short position for an unlimited time period. So, if you're a newbie, it's generally inadvisable to carry an options position into expiration if there's a chance you might end up with a short stock position.

A note on pin risk : It's not common, but occasionally a stock settles right on a strike price at expiration. So, if you were short the 105-strike calls and XYZ settled at exactly $105, there would be no automatic assignment, but depending on the actions taken by the option holder, you may or may not be assigned—and you may not be able to trade out of any unwanted positions until the next business day.

But it goes beyond the exact price issue. What if an option is ITM as of the market close, but news comes out after the close (but before the exercise decision deadline) that sends the stock price up or down through the strike price? Remember: The owner of the option could submit a DNE request.

The uncertainty and potential exposure when a stock price and the strike price are the same at expiration is called pin risk. The best way to avoid it is to close the position before expiration.

The decision tree: How to approach expiration

As expiration approaches, you have three choices. Depending on the circumstances—and your objectives and risk tolerance—any of these might be the best decision for you.

1. Let the chips fall where they may.  Some positions may not require as much maintenance. An options position that's deeply OTM will likely go away on its own, but occasionally an option that's been left for dead springs back to life. If it's a long option, the unexpected turn of events might feel like a windfall; if it's a short option that could've been closed out for a penny or two, you might be kicking yourself for not doing so.

Conversely, you might have a covered call (a short call against long stock), and the strike price was your exit target. For example, if you bought XYZ at $100 and sold the 110-strike call against it, and XYZ rallies to $113, you might be content selling the stock at the $110 strike price to monetize the $10 profit (plus the premium you took in when you sold the call but minus any transaction fees). In that case, you can let assignment happen. But remember, assignment is likely in this scenario, but it is not guaranteed.

2. Close it out . If you've met your objectives for a trade, then it might be time to close it out. Otherwise, you might be exposed to risks that aren't commensurate with any added return potential (like the short option that could've been closed out for next to nothing, then suddenly came back into play). Keep in mind, there is no guarantee that there will be an active market for an options contract, so it is possible to end up stuck and unable to close an options position.

The close-it-out category also includes ITM options that could result in an unwanted long or short stock position or the calling away of a stock you didn't want to part with. And remember to watch the dividend calendar. If you're short a call option near the ex-dividend date of a stock, the position might be a candidate for early exercise. If so, you may want to consider getting out of the option position well in advance—perhaps a week or more.

3. Roll it to something else . Rolling, which is essentially two trades executed as a spread, is the third choice. One leg closes out the existing option; the other leg initiates a new position. For example, suppose you're short a covered call on XYZ at the July 105 strike, the stock is at $103, and the call's about to expire. You could attempt to roll it to the August 105 strike. Or, if your strategy is to sell a call that's $5 OTM, you might roll to the August 108 call. Keep in mind that rolling strategies include multiple contract fees, which may impact any potential return.

The bottom line on options expiration

You don't enter an intersection and then check to see if it's clear. You don't jump out of an airplane and then test the rip cord. So do yourself a favor. Get comfortable with the mechanics of options expiration before making your first trade.

1 Describes an option with intrinsic value (not just time value). A call option is in the money (ITM) if the stock price is above the strike price. A put option is ITM if the stock price is below the strike price. For calls, it's any strike lower than the price of the underlying equity. For puts, it's any strike that's higher.

2 Describes an option with no intrinsic value. A call option is out of the money (OTM) if its strike price is above the price of the underlying stock. A put option is OTM if its strike price is below the price of the underlying stock.

3 An options contract gives the owner the right but not the obligation to buy (in the case of a call) or sell (in the case of a put) the underlying security at the strike price, on or before the option's expiration date. When the owner claims the right (i.e. takes a long or short position in the underlying security) that's known as exercising the option.

4 Assignment happens when someone who is short a call or put is forced to sell (in the case of the call) or buy (in the case of a put) the underlying stock. For every option trade there is a buyer and a seller; in other words, for anyone short an option, there is someone out there on the long side who could exercise.

5 A call option gives the owner the right, but not the obligation, to buy shares of stock or other underlying asset at the options contract's strike price within a specific time period. The seller of the call is obligated to deliver, or sell, the underlying stock at the strike price if the owner of the call exercises the option.

6 Gives the owner the right, but not the obligation, to sell shares of stock or other underlying assets at the options contract's strike price within a specific time period. The put seller is obligated to purchase the underlying security at the strike price if the owner of the put exercises the option.

7 When the stock settles right at the strike price at expiration.

8 Margin is borrowed money that's used to buy stocks or other securities. In margin trading, a brokerage firm lends an account owner a portion of the purchase price (typically 30% to 50% of the total price). The loan in the margin account is collateralized by the stock, and if the value of the stock drops below a certain level, the owner will be asked to deposit marginable securities and/or cash into the account or to sell/close out security positions in the account.

9 A margin call is issued when your account value drops below the maintenance requirements on a security or securities due to a drop in the market value of a security or when a customer exceeds their buying power. Margin calls may be met by depositing funds, selling stock, or depositing securities. Charles Schwab may forcibly liquidate all or part of your account without prior notice, regardless of your intent to satisfy a margin call, in the interests of both parties.  

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Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Please read the Options Disclosure Document titled " Characteristics and Risks of Standardized Options " before considering any options transaction. Supporting documentation for any claims or statistical information is available upon request.

With long options, investors may lose 100% of funds invested. Covered calls provide downside protection only to the extent of the premium received and limit upside potential to the strike price plus premium received.

Short options can be assigned at any time up to expiration regardless of the in-the-money amount.

Investing involves risks, including loss of principal. Hedging and protective strategies generally involve additional costs and do not assure a profit or guarantee against loss.

Commissions, taxes, and transaction costs are not included in this discussion but can affect final outcomes and should be considered. Please contact a tax advisor for the tax implications involved in these strategies.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Short selling is an advanced trading strategy involving potentially unlimited risks and must be done in a margin account. Margin trading increases your level of market risk. For more information, please refer to your account agreement and the Margin Risk Disclosure Statement.

How to Get Approved for Options Trading with TD Ameritrade

Ever thought of starting options trading? Discover the gateway to success. Do so with our blog which unravels the step-by-step guide on how to secure approval for options trading on TD Ameritrade. Unlocking the potential starts here.

To get approved for options trading with TD Ameritrade, individuals need to understand the risks and benefits of trading options. Options are contracts that give traders the right to buy or sell an underlying asset at a specific price on or before a specific date. Traders must meet certain eligibility criteria and go through the application and approval process to start trading options with TD Ameritrade.

Key Takeaways:

• Understanding the risks and benefits of options trading is crucial to getting approved with TD Ameritrade .
• Traders must meet eligibility criteria and go through the application and approval process.
• Options are contracts that give traders the right to buy or sell an underlying asset at a specific price on or before a specific date.
• TD Ameritrade offers a range of educational resources and tools to help traders improve their options trading skills.
• Once approved, traders can start exploring the opportunities and benefits of options trading with TD Ameritrade’s comprehensive platform and support.
• How to Get Approved for Options Trading TD Ameritrade

Discovering the world of options trading is an exciting venture, and obtaining approval to engage in this financial strategy is the first crucial step. This article will guide you through the process of gaining approval for options trading at TD Ameritrade, now part of Charles Schwab. From logging into your account to exploring advanced trading platforms, we’ve got you covered.

Navigating the Approval Process

Embarking on the journey of gaining approval for options trading at TD Ameritrade is a meticulous process that demands attention to detail and a clear understanding of the steps involved. This section will guide you through the nuances of navigating the approval process, offering insights into the critical stages that pave the way for engaging in options trading on this renowned platform.

Logging into Your Brokerage Account

Initiating the approval process begins with logging into your chosen brokerage account, be it TD Ameritrade, Charles Schwab, E*TRADE, Fidelity, Interactive Brokers, or Webull. This step ensures a personalised experience tailored to your preferences and lays the foundation for the subsequent stages of the approval journey.

Example: Imagine you are a trader keen on exploring options trading. Logging into your TD Ameritrade account provides a secure gateway to the application process, creating a seamless transition towards gaining options trading approval.

Initiating Options Approval on TD Ameritrade

Within the TD Ameritrade platform, users can locate the options approval feature by utilising the Search tab and entering “Options.” The subsequent selection of “Request Options Approval or Upgrade” from the Quick View menu opens the gateway to a step-by-step application process tailored to your trading aspirations.

Example: Upon entering the “Options” search term, you discover a user-friendly interface guiding you to the application section. This clarity simplifies the initiation of the options approval process, ensuring accessibility for both novice and experienced traders.

Completing the Application

The heart of the approval process lies in completing a comprehensive application form. This form delves into personal details, employment status, financial information, and investment objectives. Your responses influence the approval level assigned, ensuring a tailored approach that aligns with your risk tolerance and financial goals.

Example: As you progress through the application, you encounter questions about your financial aspirations and risk appetite. Your responses influence the approval level assigned, providing a customised experience that aligns with your unique trading preferences.

Submission and Review

After diligently completing the application, the submission initiates a thorough review process. TD Ameritrade’s review considers various factors, including financial stability and experience in options trading. Once approved, traders are assigned one of four trading levels, each catering to different risk profiles and investment goals.

Example: Submitting your application triggers a meticulous review by the TD Ameritrade team. Consider a scenario where your robust financial history and well-articulated investment objectives lead to approval for a higher trading level, providing enhanced flexibility in your options trading strategies.

In conclusion, navigating the approval process at TD Ameritrade is a structured journey that involves logging in, initiating the application, completing a detailed form, and undergoing a comprehensive review. This meticulous process ensures that traders are equipped with the appropriate permissions and knowledge to engage in options trading on this esteemed platform.

• Diving into Options Trading Education

Embarking on the world of options trading requires more than just approval; it necessitates a deep dive into education to comprehend the intricacies and potential pitfalls of this dynamic market. In this section, we will explore the significance of options trading education and provide insights into how traders can navigate the complexities for informed decision-making.

The Importance of Education

Understanding the nuances of options trading is paramount for success. TD Ameritrade acknowledges this by offering a wealth of educational resources. These resources empower traders with the knowledge needed to navigate the options market confidently.

Example: Consider a trader new to options. Engaging in the educational resources provided by TD Ameritrade, such as webinars, articles, and interactive tools, allows them to grasp concepts like strike prices, expiration dates, and various strategies, laying a strong foundation for their trading journey.

Simulation and Observation

While gaining theoretical knowledge is crucial, practical experience is equally vital. TD Ameritrade facilitates this through simulated accounts. By placing trades in a risk-free environment, traders can observe how different market scenarios impact their investments, honing their decision-making skills without real financial risk.

Example: Imagine a trader using a simulated account to execute a call option. As the stock price fluctuates, they observe the three possible scenarios – the decline, the stagnant price, and the increase. This hands-on experience helps in understanding the outcomes and refining their strategies.

In conclusion, diving into options trading education at TD Ameritrade involves accessing a rich repository of resources and leveraging practical experience through simulated accounts. By combining theoretical knowledge with hands-on learning, traders can navigate the complexities of the options market with confidence and make well-informed decisions on their trading journey.

• Understanding Risk in Options Trading

Navigating the landscape of options trading demands a comprehensive understanding of the inherent risks involved. In this section, we delve into the complexities of risk management, exploring potential outcomes and assignments that traders may encounter when engaging in options trading on TD Ameritrade.

Potential Outcomes

Options trading introduces traders to a spectrum of potential outcomes, each carrying distinct implications. For instance, if the stock price experiences a decline, a call option may expire worthless. This results in the trader retaining the premium but facing a decrease in the value of their stock holding.

Example: Consider a trader who has sold a call option. As the stock price declines, the option expires without being exercised. The trader pockets the premium but experiences a reduction in the value of their underlying stock.

Assignment and Notification

One crucial aspect of options trading is the possibility of assignment, even for options that expire slightly out-of-the-money. Traders must stay vigilant and confirm the status of their options post-expiration before taking further steps, as assignment can impact their positions.

Example: Imagine a trader holding a call option that expired just out-of-the-money. While the option may not be exercised immediately, the potential for assignment exists, and the trader should confirm the status post-expiration to make informed decisions about their stock positions.

In conclusion, understanding risk in options trading involves grasping the potential outcomes and being vigilant about the assignment process. TD Ameritrade equips traders with the knowledge needed to navigate these complexities, empowering them to make informed decisions and effectively manage risks in the dynamic world of options trading.

• Exploring the TD Ameritrade Advantage

The advantages of trading options on TD Ameritrade are more than getting past the approval process. This section delves into the unique features that make TD Ameritrade stand out in the realm of options trading, providing traders with a diverse and advanced platform for their financial ventures.

Diverse Options Market

TD Ameritrade offers traders access to an expansive and diverse options market. This not only provides a wide array of choices but also allows traders to explore various strategies, from covered calls to more complex derivatives. The platform’s commitment to diversity ensures that traders can tailor their strategies to align with their individual preferences and risk appetites.

Example: Imagine a trader intrigued by the potential of covered calls. TD Ameritrade’s diverse options market enables them to seamlessly execute this strategy, collecting premiums while maintaining ownership of the underlying stock.

Thinkorswim Platform

For advanced options traders, TD Ameritrade presents the Thinkorswim platform, a sophisticated and comprehensive tool. This platform offers elite tools, real-time market monitoring, and the ability to implement complex strategies with multiple “legs.” From monitoring the options market to planning and executing intricate trades, Thinkorswim provides a seamless, integrated experience.

Example: Consider an experienced options trader engaging in a strategy involving multiple legs. The Thinkorswim platform simplifies this complex process, providing a consolidated space for market analysis and strategy implementation, enhancing efficiency and decision-making.

Mobile Trading Technology

TD Ameritrade’s commitment to accessibility extends to mobile trading technology, allowing traders to manage their options portfolio on the go. This feature empowers traders to not only monitor and manage their options but also execute trades directly from their smartphones, mobile devices, or iPads. The convenience of mobile trading ensures flexibility in a fast-paced market environment.

Example: Picture a trader travelling or away from their computer. TD Ameritrade’s mobile trading technology enables them to seize trading opportunities and manage their options portfolio efficiently, ensuring they stay connected to the market regardless of their location.

In conclusion, exploring the TD Ameritrade advantage in options trading unveils a diverse options market, an advanced platform in Thinkorswim, and mobile trading technology for on-the-go accessibility. These features collectively position TD Ameritrade as a preferred choice for traders seeking a comprehensive and flexible options trading experience.

• Options Trading Eligibility and Requirements

To be eligible for options trading with TD Ameritrade, traders must have a funded brokerage account. The specific requirements and criteria for options trading approval vary based on the individual’s financial situation, trading experience, and investment objectives.

The application process typically involves providing personal information, employment status, financial information, and investment objectives. TD Ameritrade will review the application and assign a trading level based on the provided information.

• Understanding Options Trading Levels

TD Ameritrade offers four options trading levels : covered, standard cash, standard margin, and advanced. Each trading level has unique requirements and restrictions, providing traders with various avenues to engage in options strategies and achieve their investment objectives.

At the covered level, traders can engage in basic options strategies, such as buying call and put options. This level is suitable for investors who are just starting with options trading and have a lower risk tolerance.

The standard cash level allows traders to write covered calls and cash-secured puts. Traders at this level must have a higher level of knowledge and experience in options trading.

Traders at the standard margin level can engage in more advanced options strategies, including long calls and puts, as well as writing uncovered options. This level requires a higher level of understanding and risk tolerance.

For experienced traders, the advanced level offers the most flexibility and opportunity. At this level, traders have access to complex options strategies, such as spreads and straddles, providing them with advanced ways to capitalise on market movements.

To upgrade their trading level, traders must meet specific criteria set by TD Ameritrade. These criteria typically include demonstrating a sufficient understanding of options trading, meeting certain experience and financial requirements, and indicating the desire to engage in more advanced strategies.

By understanding the options trading levels and the associated requirements, traders can make informed decisions about their trading strategies and take steps to reach higher trading levels when they are ready.

• The Options Trading Application Process

The options trading application process with TD Ameritrade is straightforward and requires traders to complete an application form with relevant information. Traders will need to provide personal details, including their employment status, financial information, and investment objectives. This information helps TD Ameritrade assess the trader’s suitability for options trading and assign an appropriate trading level.

Traders can access the options approval screen through their TD Ameritrade brokerage account. The application form will guide them through the necessary steps to input the required information. It is essential for traders to provide accurate and detailed information to increase their chances of approval.

Once the application is submitted, it undergoes a thorough review by TD Ameritrade. The review process ensures that traders meet the necessary criteria for options trading. The trader will be assigned a trading level based on their application, reflecting their approved trading capabilities.

Traders should note that the assigned trading level may limit the types of options strategies they can employ. However, if traders wish to upgrade their trading level in the future, they can do so by meeting the necessary criteria set by TD Ameritrade and demonstrating a sufficient understanding of options trading.

Key Steps in the Options Trading Application Process:

• Access the options approval screen through your TD Ameritrade account.
• Complete the application form with accurate and detailed personal information, employment status, financial information, and investment objectives.
• Submit the application form for review by TD Ameritrade.
• TD Ameritrade will assess the application and assign a trading level based on the provided information.
• Traders can update their trading level later on if they meet the criteria for a higher level.

Example Options Trading Application Form:

Once traders complete the options trading application process and receive approval from TD Ameritrade, they can start exploring the exciting world of options trading. It is important for traders to continue learning and enhancing their knowledge to ensure successful and informed trading decisions.

• Tips for Getting Approved for Options Trading

To improve the chances of getting approved for options trading with TD Ameritrade, traders should provide accurate and detailed information on the application form. It is important to demonstrate a good understanding of options trading and its risks. Traders can also consider gaining more knowledge and education about options trading through resources provided by TD Ameritrade, such as online courses, webinars, and educational materials.

• Options Trading Education and Resources

TD Ameritrade offers a comprehensive range of options trading education and resources to assist traders in enhancing their options trading skills and knowledge. These resources provide valuable insights and practical guidance for individuals at different stages of their options trading journey. By leveraging these educational materials, traders can gain a better understanding of options trading strategies, risk management, and market analysis.

Some of the key options trading education and resources offered by TD Ameritrade include:

Online courses:

Traders can access a variety of online courses that cover different aspects of options trading. These courses are designed to cater to traders with varying levels of experience and knowledge.

TD Ameritrade regularly hosts webinars led by industry experts, covering a wide range of options trading topics. These webinars provide traders with valuable insights, real-world examples, and interactive discussions.

Video tutorials:

Traders can watch video tutorials that explain options trading concepts, strategies, and techniques in a visually engaging manner. These videos are concise and easy to follow, making them suitable for traders of all skill levels.

Articles and guides:

TD Ameritrade provides in-depth articles and guides on options trading, covering a wide range of topics such as options strategies, market analysis, and risk management. These resources offer traders detailed information and practical tips to enhance their trading skills.

By utilising these resources, traders can gain the knowledge and skills necessary to make informed decisions, manage risks effectively, and maximise their potential for success in the options trading market.

“Options trading education is essential for traders to develop a strong foundation and increase their chances of success.”

Table: Options Trading Education and Resources Comparison

• Benefits of Options Trading with TD Ameritrade

TD Ameritrade, a reputable online brokerage, offers a wide range of investment options, including options trading. Traders can take advantage of the following benefits when trading options with TD Ameritrade:

• Comprehensive Research and Analysis Tools: TD Ameritrade provides traders with powerful tools and resources to conduct thorough research and analysis of the options market. This includes real-time data, advanced charting, technical indicators, and customisable watchlists. By leveraging these tools, traders can make informed trading decisions.
• Educational Resources: TD Ameritrade offers a wealth of educational materials to help traders understand and navigate options trading successfully. Traders have access to webinars, video tutorials, articles, and guides that cover various topics, including options strategies, risk management, and market analysis. With these resources, traders can enhance their knowledge and skills.
• Customer Support: TD Ameritrade is committed to providing excellent customer support to its traders. Whether traders have questions about option strategies, account-related inquiries, or technical issues, TD Ameritrade’s knowledgeable support team is available to assist. Traders can reach customer support through phone, email, or live chat.
• Industry Recognition: TD Ameritrade has received numerous industry awards for its trading platform, customer service, and educational offerings. These accolades validate TD Ameritrade’s commitment to providing traders with a high-quality trading experience and reliable services.

In conclusion, trading options with TD Ameritrade offers multiple benefits, including access to comprehensive research tools, educational resources, reliable customer support, and a reputable trading platform. Traders can leverage these advantages to make informed decisions and enhance their options trading experience. Whether you are a beginner or an experienced trader, TD Ameritrade provides the tools and support you need to succeed in options trading.

Getting started with options trading on TD Ameritrade requires meeting certain eligibility criteria and going through the application process. It is essential for traders to demonstrate a good understanding of options trading and provide accurate information to increase their chances of approval.

Traders can enhance their knowledge and improve their application by utilising the educational resources provided by TD Ameritrade. These resources include online courses, webinars, and informative articles that cover various aspects of options trading.

Once approved, traders can take advantage of TD Ameritrade’s comprehensive platform and support to explore the opportunities and benefits of options trading. With access to a wide range of investment options and tools for research and analysis, traders can make well-informed decisions and manage their options trades effectively.

TD Ameritrade offers four options trading levels : covered, standard cash, standard margin, and advanced. Each trading level has different requirements and restrictions, determining the types of options strategies and investment objectives the trader can engage in.

The options trading application process with TD Ameritrade involves completing an application form that asks for personal information, employment status, financial information, and investment objectives. The application is then reviewed by TD Ameritrade, and the trader will be assigned a trading level based on their application.

Traders can improve their chances of getting approved for options trading with TD Ameritrade by providing accurate and detailed information on the application form. It is also essential to demonstrate a good understanding of options trading and its risks. Gaining more knowledge and education about options trading through resources provided by TD Ameritrade can also be helpful.

TD Ameritrade offers a range of options trading education and resources, including online courses, webinars, video tutorials, articles, and guides. Traders can access these materials to gain a better understanding of options trading strategies, risk management, and market analysis.

TD Ameritrade is a reputable online brokerage that provides a user-friendly platform and a wide range of investment options, including options trading. Traders can benefit from TD Ameritrade’s comprehensive research and analysis tools, educational resources, and customer support.

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TD Ameritrade Options Fees on Option Assignment and Exercise (2024)

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TD Ameritrade Options Fees Conclusion

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Overview of Technical Analysis at TD Ameritrade

Candlestick chart overview.

TD Ameritrade Candlestick Chart Types

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Understanding assignment risk in Level 3 and 4 options strategies

E*TRADE from Morgan Stanley

With all options strategies that contain a short option position, an investor or trader needs to keep in mind the consequences of having that option assigned , either at expiration or early (i.e., prior to expiration). Remember that, in principle, with American-style options a short position can be assigned to you at any time. On this page, we’ll run through the results and possible responses for various scenarios where a trader may be left with a short position following an assignment.

Before we look at specifics, here’s an important note about risk related to out-of-the-money options: Normally, you would not receive an assignment on an option that expires out of the money. However, even if a short position appears to be out of the money, it might still be assigned to you if the stock were to move against you just prior to expiration or in extended aftermarket or weekend trading hours. The only way to eliminate this risk is to buy-to-close the short option.

• Short (naked) calls

Credit call spreads

Credit put spreads, debit call spreads, debit put spreads.

• When all legs are in-the-money or all are out-of-the-money at expiration

Another important note : In any case where you close out an options position, the standard contract fee (commission) will be charged unless the trade qualifies for the E*TRADE Dime Buyback Program . There is no contract fee or commission when an option is assigned to you.

Short (naked) call

If you experience an early assignment.

An early assignment is most likely to happen if the call option is deep in the money and the stock’s ex-dividend date is close to the option expiration date.

If your account does not hold the shares needed to cover the obligation, an early assignment would create a short stock position in your account. This may incur borrowing fees and make you responsible for any dividend payments.

Also note that if you hold a short call on a stock that has a dividend payment coming in the near future, you may be responsible for paying the dividend even if you close the position before it expires.

An early assignment generally happens when the put option is deep in the money and the underlying stock does not have an ex-dividend date between the current time and the expiration of the option.

Short call + long call

(The same principles apply to both two-leg and four-leg strategies)

This would leave your account short the shares you’ve been assigned, but the risk of the position would not change . The long call still functions to cover the short share position. Typically, you would buy shares to cover the short and simultaneously sell the long leg of the spread.

Pay attention to short in-the-money call legs on the day prior to the stock’s ex-dividend date, because an assignment that evening would put you in a short stock position where you are responsible for paying the dividend. If there’s a risk of early assignment, consider closing the spread.

Short put + long put

Early assignment would leave your account long the shares you’ve been assigned. If your account does not have enough buying power to purchase the shares when they are assigned, this may create a Fed call in your account.

However, the long put still functions to cover the position because it gives you the right to sell shares at the long put strike price. Typically, you would sell the shares in the market and close out the long put simultaneously.

Here's a call example

• Let’s say that you’re short a 100 call and long a 110 call on XYZ stock; both legs are in-the-money.
• You receive an assignment notification on your short 100 call, meaning you sell 100 shares of XYZ stock at 100. Now, you have $10,000 in short stock proceeds, your account is short 100 shares of stock, and you still hold the long 110 call.
• Exercise your long 110 call, which would cover the short stock position in your account.
• Or, buy 100 shares of XYZ stock (to cover your short stock position) and sell to close the long 110 call.

Here's a put example:

• Let’s say that you’re short a 105 put and long a 95 put on XYZ stock; the short leg is in-the-money.
• You receive an assignment notification on your short 105 put, meaning you buy 100 shares of XYZ stock at 105. Now, your account has been debited $10,500 for the stock purchase, you hold 100 shares of stock, and you still hold the long 95 put.
• The debit in your account may be subject to margin charges or even a Fed call, but your risk profile has not changed.
• You can sell to close 100 shares of stock and sell to close the long 95 put.

Long call + short call

Debit spreads have the same early assignment risk as credit spreads only if the short leg is in-the-money.

An early assignment would leave your account short the shares you’ve been assigned, but the risk of the position would not change . The long call still functions to cover the short share position. Typically, you would buy shares to cover the short share position and simultaneously sell the remaining long leg of the spread.

Long put + short put

An early assignment would leave your account long the shares you’ve been assigned. If your account does not have enough buying power to purchase the shares when they are assigned, this may create a Fed call in your account.

All spreads that have a short leg

(when all legs are in-the-money or all are out-of-the-money)

Pay attention to short in-the-money call legs on the day prior to the stock’s ex-dividend date because an assignment that evening would put you in a short stock position where you are responsible for paying the dividend. If there’s a risk of early assignment, consider closing the spread.

However, the long put still functions to cover the long stock position because it gives you the right to sell shares at the long put strike price. Typically, you would sell the shares in the market and close out the long put simultaneously. 

What to read next...

How to buy call options, how to buy put options, potentially protect a stock position against a market drop, looking to expand your financial knowledge.

Schwab Statement Regarding Final Ameritrade Transition Group

The Charles Schwab Corporation has completed its fifth and final round of client account transitions associated with the acquisition of Ameritrade, marking the completion of a historic integration. 

Over the weekend of May 11-12, 2024, we successfully transitioned ~1.8 million Ameritrade client accounts and ~$350 billion in assets to Schwab—the final 10 percent of the total Ameritrade client population. This transition group included many of Ameritrade’s most engaged and active clients. As of today, 100 percent of Ameritrade’s client accounts and assets have transitioned to Schwab.

We are pleased to report that the client account and asset conversion went smoothly. Our client-first approach to integration planning helped ensure that client experiences, including thinkorswim ® platform settings and preferences, followed clients to Schwab, and that our systems were ready to support a breadth of client trading activity, including futures and foreign exchange.

Helping clients through this change has been core to our integration planning from the start. We communicated regularly leading up to the transition weekend. We developed educational resources and hosted webinars. In some instances, we proactively reached out to clients who may need extra support to help them through the process. As with prior transition groups, we added capacity to our service teams and provided extensive training. That’s because we understand that even after a successful conversion, some clients may still need our assistance. 

We continue to outperform our client retention expectations and are confident that we will continue to see client satisfaction rise over time, just as it has following other transition groups. Satisfaction scores for retail clients that transitioned in earlier groups have increased an average of 25 points after the first 90 days, and by 45 points after 9 months. Client trading volumes have increased, as has engagement with our trading platforms and adoption of our wealth and advisory solutions. Approximately 30 percent of Schwab Wealth Advisory net flows and enrollments is currently coming from legacy Ameritrade households.

We are committed to building long-term relationships with our clients that extend beyond this integration. It’s the cornerstone of our Through Clients’ Eyes strategy, and delivering a smooth transition is just the beginning. We can now share with them all the benefits of our combined offering, including best-in-class trading and education capabilities, as well as banking, fixed income, and wealth and advisory solutions—all supported by our award-winning technology and client experience, including a nationwide network of more than 400 branches. We are confident that as they become more familiar with Schwab, they will increasingly appreciate and take advantage of all we have to offer. 

This is only the beginning

More than four years ago, we embarked on the ambitious and historic effort to acquire and integrate Ameritrade because we believed that, together, we could build something better for our clients than either firm could do on its own. 

We took the time to get it right. We upheld our “best of both” commitments, transitioned Ameritrade’s marquee platforms and tools for traders and advisors, and invested $1.5 billion to enhance our platforms and increase our system capacity ten-fold. These investments have positioned us to more quickly and efficiently deliver future client enhancements and capabilities that support our long-term growth.

Today, Schwab is stronger, with more to offer than ever before. We offer more choice and access, more education and support, and the same exceptional service—plus convenience, satisfaction, and security—all at a low cost, and always without tradeoffs. Our trading and education capabilities, offered through  Schwab Trading Powered by Ameritrade TM are second to none, and we offer wealth and advice solutions in ways only Schwab can do, thanks to our significant, enhanced scale. 

The story of Schwab-plus-Ameritrade doesn’t end with this final client transition. The best days are still ahead of us as we work tirelessly to meet the needs of a range of investors and fuel growth for Schwab that has lasting benefits for our clients, employees, and all stakeholders who put their trust in us.

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How to trade options

Here are some of the fundamental steps involved in the options trading process.

1. Determine your objective.

Income generation.

You want to potentially generate income on stocks you own or would like to own.

You want to potentially reduce the downside risk on an existing stock position. 

Speculation

You want to potentially profit based on the direction you think the market will move.

Learn about the  options trading strategies  that align to these objectives.

Regardless of your trading objective, you'll need a brokerage account that's approved to trade options in order to proceed with any strategy involving options. The types of options you can place also depend on your specific options approval level. Talk to a Schwab specialist at 888-245-6864 to learn more.

Current Schwab clients can log in and  apply online for options approval .

2. Search for options trade ideas.

Whether you already have an underlying security selected or want to find one that fits your needs, there is a wide range of criteria to help you evaluate potential trade ideas that match your strategy, such as price, volume, implied volatility, sector, and more.

Options chains on Schwab.com

The options chain gives you a quick overview of the market for options on the underlying stock. You can see trading volume, price changes, and shaded areas that indicate in-the-money options.

Options chains and statistics on thinkorswim ® desktop

View statistics like the put-call ratio and IV% to determine your strategy, and use the Sizzle Index™ to help identify if options activity is unusually high or low. Learn more about options statistics on thinkorswim.

3. Analyze ideas.

Once you've identified some potential options trades, it's time to analyze them further. You can start with perspectives and ratings from third-party sources. You can also analyze each option's potential risk or reward, as well as how an option's price may be impacted by factors like changes in the underlying stock price, days to expiration, different strike prices, expiration dates, and implied volatility.

Argus Options Reports on Schwab.com

Argus Options Reports provide covered call and diagonal spread strategies on over 400 stocks that Argus Research rates as Buy or Hold.

Analyze tab on thinkorswim web

On thinkorswim web, desktop, and mobile, see risk/reward graphs showing potential profit and loss based on "what if" scenarios and probabilities so you can craft your options strategy with confidence.

4. Place your options trade.

Settled on a specific option to trade? The next step is to establish your option position by submitting an order for execution. Enter the underlying symbol, then the specific option order details (type, expiration, strike price, number of contracts, etc.). Once your order is submitted, it will be routed to the market.

Options Trade Builder on Schwab.com

Create basic to complex options trades with the click of button. Choose from a menu of single and multi-leg strategies, and options for your selected strategy will populate with the most recent expiration date and strike price. From there, press "Continue" to quickly build the order for review prior to sending.

Trade ticket on thinkorswim mobile

On thinkorswim mobile, web, and desktop, quickly create a buy or sell order ticket for any option strategy by clicking on any Bid or Ask. From there, you can adjust your price, quantity, and type of order. Press "Confirm and Send," review your trade, and send the order.

5. Manage your position.

If you bought an option, depending on what the price of the underlying asset is, you may decide to sell the option before it expires or exercise the option and buy or sell the underlying security. You might also decide to let the option expire worthless. 

If you sold an option, you could choose to close the position (by buying the option back) or do nothing and let the option expire worthless. The option may also be exercised by the buyer, requiring you to buy or sell the underlying security.

To help you make decisions on how to best manage your position, it's wise to keep an eye on key information such as market events, company news, price changes, dividends, unrealized profit/loss, and days to expiration. 

Alerts on Schwab platforms

Setting alerts is a helpful way to stay on top of your positions while you are away. There are several alert types to choose from on Schwab.com, including price activity, volume, dividends, earnings, news, and more.

Monitor tab on thinkorswim desktop

On thinkorswim desktop, web, and mobile, simplify the task of monitoring your positions by customizing the critical information you want to see, including option Greeks, profit and loss, buying power, and more.

Explore more tools available on our platforms, specifically for options trading.

Additional options resources, learn the basic options contract types and important considerations for trading them., learn about options trading at schwab., find what you need to start trading options at schwab., not yet a schwab client, already a client, have questions about options we're here to help..

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Chicago White Sox Acquire Recently DFA'd Player From Houston Astros in Mini Deal

Brady farkas | 21 hours ago.

• Houston Astros
• Chicago White Sox

After recently being designated for assignment by the Houston Astros , outfielder Corey Julks has been traded to the Chicago White Sox for pitcher Luis Rodriguez. Julks has been immediately optioned to Triple-A Charlotte.

The White Sox announced the move on social media:

White Sox announce four roster moves: Prior to today's game vs. Washington, the Chicago White Sox announced the following four roster moves:

-Acquired: OF Corey Julks from the Houston Astros in exchange for RHP Luis Rodriguez

-Optioned to Class AAA Charlotte: Julks

-Recalled from Charlotte: OF Dominic Fletcher

-Designated for assignment: OF Rafael Ortega

pic.twitter.com/vQM7zRhTVl — Chicago White Sox (@whitesox) May 15, 2024

Given that the White Sox are 13-30 on the season, Julks figures to get an opportunity to continue his career and make an impact at the big league level sometime soon. The 28-year-old made his major league debut with the Astros in 2023, hitting .245 over 93 games. He had six homers and 33 RBI while also adding 15 stolen bases, as he helped the Astros advance to the ALCS for the seventh straight year.

The White Sox are currently utilizing Tommy Pham and Andrew Benintendi, and a revolving third door in the outfield. They will hopefully welcome back Luis Robert Jr. soon from injury, but perhaps Julks could see time at designated hitter or as a fourth outfield option for Pedro Grifol.

As for Rodriguez, he is 2-2 lifetime at the minor league level with a 3.93 ERA. He was signed out of Venezuela and is currently 20 years old. He is listed now as being part of the Astros Florida Complex League team.

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BRADY FARKAS

Brady Farkas is a baseball writer for Fastball on Sports Illustrated/FanNation and the host of 'The Payoff Pitch' podcast which can be found on Apple Podcasts and Spotify. Videos on baseball also posted to YouTube. Brady has spent nearly a decade in sports talk radio and is a graduate of Oswego State University. You can follow him on Twitter @WDEVRadioBrady.