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Can options become worthless?

Unlike a stock, each option contract has a set expiration date. The expiration date significantly impacts the value of the option contract because it limits the time you can buy, sell, or exercise the option contract. Once an option contract expires, it will stop trading and either be exercised or expire worthless.

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There are a few important things to keep in mind as the expiration date of your option contract nears: We’ll attempt to exercise any option you own that is $0.01 or more in the money, as long as your brokerage account has the required buying power (in the case of a call option) or the necessary underlying shares to sell (in the case of a put option). Keep in mind that managing your options positions, including taking proactive steps to mitigate risk, is ultimately your responsibility. If you don’t have enough buying power or underlying shares to exercise your option, we may attempt to sell the contract in the market for you within the last thirty minutes before the market closes on the options' expiration date. Robinhood’s risk checks are designed to close positions which accounts cannot support and take into consideration the value of a position, the implied risk, and the customer’s current balance, among other things. If your option is in the money at the close, Robinhood will attempt to exercise it for you at expiration unless:

You don’t have sufficient buying power.

The exercise would result in a short stock position.

You have asked Robinhood to submit a Do-Not-Exercise request on your behalf.

The cut-off time for submitting a Do-Not-Exercise request is 5 PM ET.

If you have a long call about to expire:

If the contract is in the money (or at risk of being in the money), we’ll review your account to see if you have enough buying power to purchase the underlying shares. If you don’t have enough buying power to purchase the underlying shares, we may attempt to sell the option. For example, if you have 10 contracts, but only enough buying power to purchase 500 shares, we may attempt to sell 5 contracts and allow 5 contracts to be exercised for a total of 500 shares. To avoid this, you can close the position or roll it to a later date prior to the last thirty minutes of trading (before 3:30PM ET on normal trading days). Keep in mind that options rolling involves simultaneously closing a position (realizing any gains or losses) and opening a new one. Also, options rolling is only available in margin accounts .

If you have a long put about to expire:

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If the contract is in the money (or at risk of being in the money), we’ll review your account to see if you have enough of the underlying shares to sell. If you don’t have enough of the underlying shares, we may attempt to sell the option. For example, if you have 10 contracts and own 500 shares, we will attempt to sell 5 contracts and allow the remaining 5 contracts to be exercised, which would result in 500 shares sold from your brokerage account. To avoid this, you can close the position or roll it to a later date prior to the last thirty minutes of trading (before 3:30PM ET on normal trading days). Keep in mind that options rolling involves simultaneously closing a position (realizing any gains or losses) and opening a new one. Also, options rolling is only available in margin accounts .

If you have a spread about to expire:

If both legs are in the money (and neither leg is at risk of being out of the money at expiration). The short leg may be assigned, and the long leg may be exercised to offset the assignment. If the spread is partially in the money or close to being partially in the money (i.e. only one leg is in the money or at risk of being in the money), we may attempt to close the entire spread (including the leg that is out of the money). To avoid this, you can close the position prior to the last thirty minutes of trading (before 3:30PM ET on normal trading days). If both legs are out of the money (and they aren’t at risk of being in the money at expiration), we typically won’t take action and both options should expire worthless. Once your contract expires, we’ll remove it from your home screen. You can view your expired contracts in your account history.

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