Calendar Option Spreads (Horizontal Option Spreads)
If your Short Leg is in-the-money (ITM) at the market close, you may be assigned and required to buy or sell the underlying shares. This could result in a margin call, which you will need to cover by exercising the Long Leg, liquidating or buying to cover the assigned shares, or depositing funds. Redbridge may take actions to mitigate risk without notice, such as closing your short position before the market close or closing your margin call.
To avoid potential Short Leg assignments, close the Short Leg option before the market close. Remember that short option contracts may be assigned at any time, and you might be assigned on an out-of-the-money (OTM) short option contract.
Vertical Option Spreads
If your Short Leg is ITM at the market close, you may be assigned and required to buy or sell the underlying shares. We recommend closing the position when the Long Leg is OTM. Redbridge reserves the right to take necessary actions if you do not take action prior to 3 hours before the market close on the contract expiration date.
If the Long Leg is ITM and your Short Leg is OTM at the market close, the Long Leg will be auto-exercised if ITM by $0.01 or more. Redbridge may submit Do Not Exercise instructions on your behalf if there's insufficient Buying Power. To avoid a potential short assignment outcome, close the short option or the spread prior to the market close.
Please note that short option contracts may be assigned at any time (not just after the option expires), and you might be assigned on an OTM short option contract.
You are responsible for monitoring your account and any losses incurred from options activity, including actions taken by Redbridge. Options trading entails significant risk and is not appropriate for all investors. Be sure to understand the risks involved and carefully consider your investment objectives before trading options.