What is an Expiry Date Option?

An Expiry Date Option, also known as a Zero-Day Option, refers to the final day of an option contract, which coincides with the option's exercise date. Before this expiration date, investors have the flexibility to exercise the option at any time, thereby executing the contract. The expiry date is a critical factor in options trading, since it significantly influences both the option's pricing and the associated trading strategy. Expiry Date Options are predominantly used in trading assets such as stocks, bonds, commodities, and currencies.

How to Exercise an Expiry Date Option

1. Confirm the Option's Status: Before exercising an option, it is essential to determine whether the option is worth exercising:

Call Options: An option is considered in-the-money if the current market price exceeds the strike price, making it advantageous to exercise.

Put Options: Conversely, an option is in-the-money if the current market price is below the strike price.

Note: If the option is out-of-the-money—which means the market price is unfavorable relative to the strike price—it is generally not advisable to exercise the option.

2. Check the Expiration Date: Next, verify the expiration date of the option. This date is the final deadline by which the trader must decide whether to exercise the option. Options typically expire on this date or at some point before it.
3. Choose the Exercise Method: Options can be exercised either automatically or manually:

Automatic Exercise: Many trading platforms or brokers will automatically exercise all in-the-money options on the expiration date. Therefore, traders usually need to opt-in to enable the automatic exercise feature.

Manual Exercise: Alternatively, if the broker does not offer automatic exercise services, or if the trader prefers to control the timing of the exercise, they must submit an exercise request prior to the expiration date.

Exercising an Expiry Date Option involves evaluating the option's intrinsic value, the timing of expiration, and individual investment strategies. Thus, making timely decisions about whether to exercise and adhering to the broker's procedures—while also considering associated fees and tax implications—can help optimize the benefits derived from option trades.

How to Trade on uSMART

Upon logging into the uSMART HK app, navigate to the "Options" section at the top of the page to view available options. For popular option indices, click to access detailed information. Refer to the provided image guide for step-by-step instructions.