Options FAQ

• What is Questrade’s new option pricing?
• How does it work?
• Is $0 commission trading still available?
• If I have more than one account, does volume-based pricing apply to all my accounts?
  
• What if I am a Professional Trader?
• What happens to my refund if I close or transfer out my account fully?
• What happens to my long option on the expiration date?
• Options expiration control: What is the 'Self-managed options' setting?
• What happens to my short option on the expiration date?
• When should I use an expire worthless request?
• Why was my put option sold on the expiration date in my registered account?
• Why did my "in-the-money" option expire worthless?
• What are the unique risks of trading spreads on expiration day?
• Why did Questrade liquidate my out-of-the-money option positions?
• Why did my order to open a same day expiring short option get rejected after 2 pm ET?
• What is the processing fee to exercise an option?
• When will I know if I've been assigned/exercised on my expiring option?
• What if the underlying stock for my option is halted on expiration day?
• What happens if I enter a short position as a result of exercise/assignment?

For your first 250 U.S. options contracts you will pay USD $0.99, the next 250 (251-500) you will pay USD $0.75, and so on. The more you trade the lower pricing you receive on incremental contracts traded. You will continue to pay $0.99 per contract throughout the month but receive a refund on the second business day of the following month for all the qualifying U.S. options traded the previous month.

Yes, volume-based pricing for U.S. options applies to all your accounts under your User ID. 

If you are an authorized trader for someone else, trades executed by the authorized trader would apply to the primary account holder

Long option positions held at expiration that are “in the money” by $0.01 or more, are automatically exercised by the relevant clearing corporation*.

“Out of the money” options automatically expire worthless.

If you hold a long call or put option contract that is at risk of being “in the money”, you must take one of the following actions on the option’s expiration date:

1. Ensure you have sufficient buying power or the required underlying equity position to afford the automatic exercise
2. Sell-to-close (STC) the position by 2 pm ET on the expiration date**

If your option is at risk of being “in-the-money” on the expiration date, please make sure to take one of the above actions.

Otherwise, we may (without notice) liquidate these options on your behalf after 2 pm EST on the expiration date. This action has a $45 service fee attached to it in addition to the regular commissions.

If we are unable to liquidate your long “in-the-money” option contracts by market close, your options will automatically exercise, and you will be responsible for the securities bought or borrowed as a result.

You also assume any market risks associated with these securities and your account may enter a margin call or debit balance as a result.

In addition, if you have insufficient buying power for automatic exercise, we reserve the right to prevent your “in-the-money” options from being automatically exercised. If your “in-the-money” options are not exercised, any closing value(s) will be lost.

That’s why it's important you take action on your own on the expiration date.

*Note: “In-the-money” options may not be automatically exercised on expiration date if the CDCC or OCC excludes them due to a corporate action or when trading of the underlying security is halted. Refer to question 11 for more details

**Note: For options expiring on shortened trading days, please take action 2 hours prior to market close. For example, if the market is closing at 1 p.m. ET, please take action by 11 a.m. ET on the expiration date.

The 'Self-managed options' setting in Questrade Edge allows traders to have more control over their single-leg long options on expiration day.

This feature allows you to manage your expiring single-leg long options all the way to market close. 

It is designed for active traders who prefer to handle their own expiration decisions based on price moves during the final hours of the regular trading session.

How do I enable the 'Self-managed options' control?

This is a one time opt-in setting available on all Questrade Edge platforms.

To activate it, from your trading platform, go to Settings > Expiring Options and toggle 'Self-managed options' to ON.

This setting remains ON until you turn it off.

Changes made to this setting on the options expiration day will be applied on a best efforts basis.

What positions does this setting apply to? 

This setting only applies to single-leg long option positions. The setting does not apply to short option positions or any positions that are part of a strategy as those position types carry unique risks on expiration day.

What accounts does this setting apply to?

Once accepted, this setting will apply to all accounts where you are the primary account holder. 

This setting cannot be enabled by authorized traders or secondary joint account holders.

Changes made to this setting on an option's expiration date will be processed on a best-efforts basis.

What is my key responsibility when using the 'Self-managed options' setting?

Regardless of this setting, it is always your responsibility to manage the risk associated with your expiring option positions. 

The 'Self-managed options' setting reduces the probability that Questrade will liquidate a single-leg long option in the last 2 hours of the trading day even if you don’t have sufficient buying power to afford the automatic exercise of that option. This gives you greater control over when you close your expiring single-leg long option position.

If you fail to close your option and it automatically exercises, you will be responsible for the resulting position and associated market risk. If you can’t afford automatic exercise, we may choose to expire your option worthless and you would lose the entire value of the option as a result.

I had the 'Self-managed options' setting on and Questrade closed my expiring single-leg option position anyway, why?

Questrade reserves the right to take action on any expiring option position at our discretion and in some cases may close a position regardless of this setting. If a client fails to manage the risk of their expiring option positions, we may deactivate the setting permanently.

If you are holding a short call or put option contract and it is at risk of being assigned (on the expiration date), you must meet one of the following conditions:

1. Make sure to have sufficient buying power or the required underlying equity position available in your account to afford the assignment
2. Buy-to-close (BTC) the position by 2 pm ET on the expiration date**

If we are unable to close all affected contracts by market close, and your options are assigned, you will be responsible to pay for the securities bought or borrowed as a result of the assignment and your account may enter a margin call or debit balance as a result.

You also assume any market risk associated with those securities.

Please note that short call & put options can be assigned at any time (even if they are out-of-the money).

**Note: For options expiring on shortened trading days, please take action 2 hours prior to market close. For example, if the market is closing at 1 p.m. ET, please take action by 11 a.m. ET on the expiration date.

Long options that are “out-of-the-money” at market close on expiration day will automatically expire worthless. You do not need to enter an “expire worthless” request in this scenario.

If you are unable to sell your long option position and wish to ensure it does not automatically exercise if it becomes “in-the-money”, you can submit a request to have your option expire worthless.

“Expire worthless” requests must be submitted before 2 pm ET on the expiration date. To submit your request please log into myQuestrade and follow the below steps:

Requests → Exercise an option → Action → Expire worthless

Exercising an in-the-money put option will result in selling the underlying shares (typically 100 shares per contact) as part of the process.

If you don’t own the underlying stock (married put), when the option contracts get exercised, it would result in you having a short position (at the strike price).

Since the Canada Revenue Agency (CRA) prohibits short-selling in registered accounts, we may choose to either sell the put option position or expire it worthless.

However, if you own a married put (long put option and the underlying shares) then your shares will automatically sell at the strike price (as long as your put option is in-the-money on the expiration date).

We reserve the right to prevent your in-the-money long call/put options from being automatically exercised.

We may also choose to expire a long in-the-money option (call/put) worthless if you do not have sufficient buying power to exercise the option.

If we expire your option worthless, any closing value of the option will be lost.

Option spread strategies include trading long & short options of the same underlying securities and expiration dates (but different strike prices).

In a scenario where only one of the legs is “in-the-money” on expiration day, there is a possibility of having an unhedged (unprotected) position in your account.

Questrade may take action to close one or more legs to prevent an unprotected position from occurring.

To better understand this concept, please refer to the example below:

Vertical call credit spread

• Short: 3 DIS 15May20 C109.00
• Long: 3 DIS 15May20 C114.00

If on the expiration date, DIS closed at $110 (between the strike prices of long and short options), then the long option would be out-of-the-money and will expire worthless and the short leg will end up in-the-money and may get assigned.

Here is the margin required for assignment:

In this case, the combined USD buying power in your account should be at least $9,810 USD. If your buying power is less than that, Questrade may choose to close the option leg or entire option strategy to mitigate the assignment risk.

Just because a short option closes out of the money, does not mean it won’t be assigned. Short options can be assigned whether they are in or out of the money and a post market move on the underlying may increase the chances of a short option being assigned even though the underlying closed OTM. 

Note: If we are unable to liquidate your option position(s) by market close, your option(s) may be automatically exercised or assigned and you will be responsible for the securities bought or borrowed as a result. You also assume any market risks associated with these securities

We take into consideration the potential automatic exercise or assignment risks.

Although the option may have been out of the money at the time of liquidation, market volatility can cause a position to go into the money at any time.

This is especially important for short options, where the option can be assigned even if it is out of the money.

After 2 pm ET on the option's expiration day, orders to open any short option position will require naked option permissions and buying power. This applies to any short option, even if it is part of an option strategy. This is done to mitigate potential risks associated with option assignment.

If you are attempting to open a covered call after 2 pm ET on a same day expiring option, you can contact our trade desk at 1-866-980-9590.

The processing fee for exercising is $24.95 per option position.

Options assignments are free.

For more information, please visit our fees page.

Your positions will be updated the next business day on the trading platform.

To review your Account activity page please follow the steps below:

• Log in to your Questrade account.
• On the top navigation bar, head over to the Reports page.
• From here, click on the Go to transaction history button. 

“In-the-money” options may not be automatically exercised on expiration date if the CDCC or OCC excludes them due to a corporate action or when trading of the underlying security is halted.

If this is the case, to ensure your in-the-money options are exercised, inform us of your intention to exercise them on the expiration date by submitting a request in the Questrade customer portal or by contacting us.

In this scenario, if you don’t make an explicit request to exercise, your in the money option may expire worthless.

If you enter a short position as a result of an option exercise or assignment, depending on the security, we may begin charging you daily borrow fees.

You can view borrow fees directly from your trading platform.

Disclaimers

¹ As low as $0/contract pricing applies to US Options only.

Questrade, Inc. will provide a refund on your 99¢ USD options contract fees, charged in United States Dollars (“USD”), based on the progressive options pricing tiers you get to during the calendar month of trading. The refund for each tier applies only to contracts executed within that tier. For example, fees for contracts that fall into tier 2 are refunded based on the tier 2 rate, and fees for subsequent contracts that fall into tier 3 are refunded based on the tier 3 rate, and so on. Please see our options pricing for details on each tier.

Contract fee refunds will be paid out on the first business day of the month following the month in which the trades occurred. Refunds will be credited to the account(s) in which the eligible trades were executed. Other fees may still apply and are not covered by the refund. If a refund is paid into an individual RESP or Family RESP account, it will be credited in CAD equivalent of USD, as USD deposits are not available for RESP accounts.

Options trading involves risks and is not suitable for all investors, as the special risks inherent to this type of trade may expose investors to potentially rapid and substantial losses.

Note: The information in this blog is for educational purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied, is made by Questrade, Inc., its affiliates or any other person to its accuracy.