Instructions: Log in to the app, then click Accounts > Any Account > More > Option Exercise
When to request: you may submit requests to exercise stock options anytime between the purchase and the expiration of your options contracts. However, your request submission time will affect the effective date of the exercise.
Hong Kong Stock Options
● Exercise requests submitted before 16:00 BJT (12:00 BJT if on a half trading day) on a regular trading day will be settled on that day.
● Exercise requests submitted after 16:00 BJT(12:00 BJT if on a half trading day) on a regular trading day will be settled on the next trading day.
● Exercise requests submitted outside regular trading days will be settled on the next closest trading day.
● Exercise requests submitted after trading sessions on the expiration day of the requested options will not be accepted.
When to withdraw: typically, you may withdraw exercise requests before their effective dates on the following occasion. (Withdrawals made outside of the following time interval will not be successful):
For Hong Kong Stock Options: before 16:00 BJT (12:00 BJT if on a half trading day) on the effective date of the exercise
Evaluating and freezing account buying power
● After receiving your exercise request, the system will calculate whether your account has enough buying power to complete the exercise. If your account fails to have sufficient buying power, or if the exercise may escalate your account risk level to Margin Call, the system may decline your exercise request.
● Once your account successfully passes buying power evaluation, the system will temporarily freeze its buying power until the end of the exercise.
● After receiving your request to withdraw a certain exercise, the system will conduct a risk assessment on its potential influence. If withdrawing this request may escalate your account risk level to Margin Call, the system may decline your withdrawal request.
● The system will release your account buying power once your withdrawal request successfully passes risk assessments.
You may not exercise the following types of options contracts:
● options contracts in pending orders
● options contracts on exercise requests
You may still close your options positions after submitting exercise requests. The number of options contracts you hold after trading sessions will determine the final amount of executed exercise requests.
Notes: As for Hong Kong stock options, you may submit requests to early exercise options contracts that are 1.5% or above in-the-money.
If you checked 「Mandatory option exercise is allowed」, your requests will be accepted whether or not your options contracts are in-the-money after market close.
If you did not check 「Mandatory option exercise is allowed」, your requests will not be accepted when your options contracts are not 1.5% or above in-the-money or are out-of-the-money after market close.
For call options: P&L from an exercise = (share price - strike price) * contract size * # of contracts exercised - option price * contract multiplier * # of contracts exercised
For put options: P&L from an exercise = (strike price - share price) * contract size * # of contracts exercised - option price * contract multiplier * # of contracts exercised
Options contracts contain not only intrinsic value (in-the-money value) but also extrinsic value, which includes time value and implied volatility. Typically, early exercise may not be the optimal solution because the time value of your options will be sacrificed.
When an option is deep in the money, it typically has little remaining time value and low liquidity. In this scenario, investors may not be able to close the position with a reasonable price on the market, which makes exercising the option before its expiration day a preferred decision.
If investors wish to receive dividends by owning the underlying shares of their options, they may choose to exercise their call options before the ex-dividend day of the underlying company.
Instructions: Log in to the app, then click Accounts > Any Account > More > Option Exercise
When to lapse: You can make requests to lapse options anytime between the purchase and the expiration of your options contracts. A lapse request typically takes effect after the trading session on the expiration day of the option concerned. Lapse requests made after trading sessions will not be accepted.
When to withdraw: Typically, you may withdraw a lapse request before the market closes on the expiration day of the option concerned. Withdrawal requests made after trading sessions will not be accepted.
Risk assessment and release of margin
● After receiving your lapse request, the system will conduct a risk assessment on its potential influence. If this lapse request may escalate your account risk level to Margin Call, the system will decline to process it.
● After your lapse request successfully passes risk assessment, if the long option on your lapse request gets in the money (or approximately in the money) during its close-to-expiry stage, the system will neither automatically exercise this option after its expiration nor raise the margin requirement for your account.
● After receiving your request to withdraw an option lapse request, the system will conduct a risk assessment on its potential influence. If the withdrawal may escalate your account risk level to that of Margin Call, the system will be unable to withdraw this lapse request.
● After your withdrawal request successfully passes risk assessment, if the long option on your lapse request is in the money(or approximately in the money) during its close-to-expiry stage, the system may raise the margin requirement for your account. (For details, please visit https://www.futuhk.com/support/topic431)
You may not lapse the following types of options contracts:
● options contracts on lapse requests
You may still close your options positions after submitting lapse requests. The number of options contracts you hold after trading sessions will determine the final amount of executed lapse requests.
Investors have the right to lapse options they hold long in their accounts.
If a close-to-expiry long option is not in the money, it will lapse automatically after its expiration day. In this case, making a lapse request has no practical effects.
If you hold a long option that fails to get in the money during its close-to-expiry stage, the system may raise the margin requirement on your account. (For details, please visit https://www.futuhk.com/support/topic431) By choosing to lapse this option, you may avoid having to fulfil the extra margin requirements it brings about, which reduces the overall risk for the account.
Please note: If an account holder requests to lapse an option and chooses not to close the position after its expiration day, this option will lose all its value. Additionally, this option will not be subject to automatic exercise regardless of whether it is in the money or not. In this scenario, the account holder has to bear the potential liabilities and losses incurred.