Options Expiration, Assignment & Closing

The option buyer (long holder) has two options at expiration: exercise or sell to close their position. In-the-money options on LedgerX are not automatically exercised at expiration. This means you must exercise or sell to close your in-the-money options, else the options will expire worthless.

Expiration Date Options expire on Friday's. This is the last day that the option contract can be traded or exercised.
Expiration Time Options expire at 4pm ET. You can sell to close your options position anytime before 4pm ET.
Settlement Time Options settlement is at 5pm ET. The option buyer can submit exercise instructions anytime before 5pm ET.

Expiration FAQs

What is expiration?

Expiration is the last day that the option contract can be traded. 

  • Options expire at 4 pm EST on the expiration date. Settlement runs at 5 pm EST.
  • Options on LedgerX are European-style, meaning the buyer can only exercise the option at expiration.
  • LedgerX options are physically-settled and there is no auto-exercise, meaning LedgerX will not determine if your options are in-the-money or out-the-money at settlement. 
  • The positions tab on the dashboard shows your current positions > the position history shows both current and expired positions. 
  • Exercise instructions come available 48 hours before settlement (settlement is at 5pm ET on the expiration date). You’ll be notified on the platform when instructions open. The upper right bell and your positions will be yellow. Click on the bell to load your position history and submit instructions.

  • The option buyer has until 5pm EST on expiration to submit exercise instructions.
  • You can trade (close) out of a position anytime before expiration.
What do I need to do for expiration?

There is a long holder & short holder in every position. Only the long holder can exercise their position. Each holder has the option to do the following as described below.

Long Holder

Before an option expires, option owners who are long (buyer) can choose to…

  1. Exercise the option - The option buyer has until 5 pm EST on expiration to submit exercise instructions on the platform under Balances & History > Exercise Instructions*
  2. Close their position to realize their profit or loss 
  3. Let the contract expire worthless 

*If sufficient collateral is not on deposit at LedgerX, the exercise instructions will not be accepted. There is no auto-exercise. To submit exercise instructions

  • Long Calls need USD = (Strike Price X # of contracts) on the platform 
  • Long Puts need BTC/ETH on the platform

Send USD via wire transfer (how to here) or send BTC/ETH (how to here).

Short Seller

Before an option expires, option owners who are short (seller) can choose to…

  1. Take no action and possibly be assigned on the contracts
  2. Close their position to realize their profit or loss 
  3. If you do not close the position, the options will either expire worthless or if in the money, you would possibly be assigned on the contracts.  

Note: You are not required to post short collateral when selling to close a position.

If you are Long and want to exercise...

Exercise Call Options

When you exercise a long call option, you are buying BTC/ETH at the USD strike price. You need USD on the platform to submit exercise instructions. 

Ex. You are long 100 call options for the Dec 2022 expiration and want to exercise because BTC is trading at 150K but you can purchase as the strike price of 30K. 

Exercise Put Options

When you exercise a long put option, you are selling BTC/ETH at the USD strike price. You need BTC/ETH on the platform to submit exercise instructions. 

You are long 10 put contracts Dec 2022 expiration and want to exercise because BTC is trading at 150K and you can sell at 200K.

 

What are physically-settled options?

Physically settled contracts means that the underlying asset (in this case BTC/ETH) will be delivered upon expiration in exchange for USD. All LedgerX contracts are physically settled. 

  Futures  

  Buyers receive bitcoin 

  Sellers receive US dollars

  Options  

  Call buyers that exercise receive BTC/ETH; and sellers on the other side receive the strike price in cash 

 Put buyers that exercise receive cash equal to the strike price; and put sellers receive BTC/ETH

  Swaps  

  Selling BTC/ETH ; receive cash

  Buyers of BTC, receive BTC / Buyers of ETH, receive ETH

 

What are European-style options?

European Style Options are only exercisable at expiration. All options on LedgerX are European-style. The full contract specifications for LedgerX mini and deci options are available here.

Submitting and changing exercise instructions

Submit Exercise Instructions on the platform (to exercise your long position)

Change Exercise Instructions on the platform

The long holder can edit instructions any time up until 5pm ET on expiration. 

You submitted instructions to exercise 100 of 100 BTC 2022-31-12 Call $10,000. You want to change your instructions to only exercise 50 of your 100 contracts.

  • Navigate to your expiring position
  • Enter the number of contracts you want to exercise (50)
  • Click Save Edit

mceclip2.png

 

Call Options at Expiration & Settlement

At time of trade execution:

  • The long holder paid a USD premium to the seller for the option.
  • The short holder received this USD at time of trade.
  • The underlying asset (BTC/ETH) is Position Locked on the short holder's account at time of trade.

At expiration/settlement:

  • If the long holder exercises, they pay the USD strike price to buy BTC/ETH. BTC/ETH is transferred to the buyer's LedgerX account at settlement, and USD is transferred to the seller's account at settlement.
  • If the long holder does not exercise, the option expires worthless. The underlying asset (BTC/ETH) that is Position Locked on the short holder's account is unlocked at 5pm ET settlement and made Available for Trading in the short holder's account. 
Put Options at Expiration & Settlement

At time of trade execution:

  • The long holder paid a USD premium to the seller for the option.
  • The short holder received this USD at time of trade.
  • The underlying USD strike price is Position Locked on the short holder's account at time of trade.

At expiration/settlement:

  • If the long holder exercises, they sell BTC/ETH at the strike price. USD is transferred to the long put holder's LedgerX account at settlement, and BTC/ETH is transferred to the short put holder's account at settlement.
  • If the long holder does not exercise, the option expires worthless. The underlying USD that is Position Locked on the short holder's account is unlocked at 5pm ET settlement and made Available for Trading in the short holder's account. 
What happens if I don't exercise my long options?

If you do not exercise your long options, the option expires worthless. If you want to exercise your long options, you need to submit exercise instructions on the platform in Balances & History >Exercise Instructions.

There is no auto-exercise on LedgerX, meaning you must submit instructions to exercise. If you do not submit instructions, your options will expire worthless even if they are in-the-money (ITM). 

 

 

Post-Settlement

You can view your positions in Balances & History > Position History. See the exercise/assignment column to see how many options were exercised or assigned.

Expired Positions will be displayed under Balances and History>Position History

10_-_post_settlement_2x.png

Closing out of a Position

You can close out (trade out) of a position anytime before expiration. Options expire at 4pm ET on the expiration date. 

Selling to Close

You can close a long position by selling the number of contracts that you are long.

  • Sell the number of contracts that you are long
  • You do not need to post collateral for a short position when selling to close

Example: You are long +1 2020 06-26 Put $25,000. When you bought this contract last month, you paid $170 in premium. As expiration approaches, you decide you want to close the position. 

When selling the contract, enter the BTC mini quantity (1 in this example) and the limit price. You will see the Total Premium Received, or the amount you will receive for selling this option. The Total Locked is an indication of the position-locked collateral. However, you are not required to post short collateral when selling to close a position.

When your trade executes, your position will be 0 and you will receive the USD premium from selling the option.

Steps to close your long position:

  1. Click on Positions in the main dashboard (to the right of Open Orders) > click the position you want to close 
  2. Click Sell to Close to launch the order form
  3. Enter the price you want to receive. The Contracts field is populated with the number of contracts you are long.
  4. Review your sell order. You will see the Premium or the amount you will receive for selling this option. (Typically you post close to the current Ask Price)
  5. Confirm your order 
  6. When your trade executes, your position will be 0 > view in Open Orders until filled 
Buying to Close
You can close a short position by buying the number of contracts that you are short. The Position Locked collateral for the short position will be unlocked when you close the position

Example: You are short -1 2020 06-26 Put $25,000. When you sold this contract last month, you received $170 in premium and position locked $250 (the deliverable at expiration). As expiration approaches, you decide you want to close the position. 

  • When buying the contract, enter the BTC mini quantity (1 in this example) and the limit price. You will see the Total Premium Paid, or the amount you need to pay to buy this option.
  • When your trade executes, your position will be 0 and the $250 position locked collateral for this short put will be unlocked.

Steps to close your short position:

  1. Click on My Positions in the main dashboard (to the right of Open Orders)
  2. Click the position you want to close
  3. Click Buy to Close to launch the order form
  4. Enter the price you want to pay. The Contracts field is populated with the number of contracts you are short.
  5. Review your buy order. You will see the Total Premium or the amount you need to pay to buy this option.
  6. Confirm your order

When your trade executes, your position will be 0 and the position locked collateral for this short position will be unlocked.

Was this article helpful?
0 out of 0 found this helpful