There are few better brokers for trading options than Webull. Even so, instructions on how to set up your options trades and how to exercise those options are not readily available. I did some additional research and played around with Webull’s app to find out how exactly options are exercised on Webull:
Webull auto-exercises options if they are $0.01 or more in the money at the time of expiration. You can prevent Webull from auto-exercising your options by selecting the do-not-exercise (“DNE”) button. You can also manually exercise an option before the expiration date by contacting email@example.com.
We will not only look at whether options get exercised automatically but also why Webull exercises options by default. I’ll also go step by step over how options are exercised on Webull and how to prevent auto-exercising even if you are in the money.
Do options get exercised automatically?
As stated above, Webull options do get exercised automatically but only if they are in the money at the time of expiration. Conversely, this means that options that are out of the money will not be auto-exercised. Let’s look at some examples to clear things up:
- In The Money (ITM): An option counts as in the money if at the time of expiration it is at least one cent in the money. In this case, Webull will auto-exercise the options unless you have enabled the DNE button (more on this later).
- Out Of The Money (OTM): The opposite of in the money is called out of the money. Webull will also never auto-exercise an option that is out of the money. However, this does not prevent auto-liquidation (see below).
- At The Money (ATM): An option is considered “at the money” if it is neither in the money nor out of the money. In this case, Webull will also not exercise your option automatically even if the DNE button is disabled.
While auto-exercising options that are in the money usually is beneficial to the option holder there may be some circumstances when you prefer to decide manually when an option is exercised.
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How to stop Webull from auto-exercising options?
Fortunately, Webull has a built-in feature to prevent the option from exercising automatically. This feature is called the do-not-exercise button or DNE button and can be found on the bottom part of the screen. Although Webull officially calls it a “button” it looks more like a toggle switch after the most recent app update:
As you can see from the screenshot above the “Do not Auto-Exercise at Expiration” toggle switch is turned on for this particular trade which prevents Webull from exercising this option even if it is in the money at expiration.
In order to stop auto-exercising you basically have two options:
- While Placing the Order: When initializing the trade you will already have an option to hit the DNE button.
- After Placing the Order: But even after the initial setup, you can always check the option’s status under the “Type/Status” label. In the above trade, it says “DNE” which means this option will not be auto-exercised.
While Webull may not exercise this option on your behalf there is still some inherent liquidation risk involved. We’ll look at a potential auto-liquidation next.
What about Auto-Liquidation?
If an option has expired and has not been exercised at least 35 minutes before market close your account may be at risk of liquidation. Liquidation can occur if the equity in a user’s account is not sufficient to cover the hypothetical exercising of the expired option.
Webull does this to prevent accounts from incurring excessive risk due to unrealized losses.
While auto-exercising options is great in most cases, sometimes you might want to have more manual control over when the option is exercised exactly. Let’s look at how you can!
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How to manually exercise options on Webull
Manually exercising an option before expiration is surpisingly simple with Webull. However, it’s important to note that this possibility is only available up to 4:30 pm the day prior to expiration. Here’s what you need to do:
- Go to the Webull Help Center
- Contact Webull customer service
- Include the following information in your request: Contract, Quantity, Action Statement (i.e. please exercise the following option).
If you follow the steps above and do so the day before expiration until 4:30 pm there is a high chance that Webull will exercise the option on your behalf. The cut-off time refers to the point in time of sending the request.
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Webull auto-exercises options when the DNE option is not enabled. However, disabling auto-exercising is very simple. Even manually exercising an option prior to expiration is a possibility with Webull.
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