Hi I am new to option trading and new to the binary option forum
I have watched and read endless content to get me head around how option trading works
I have started to dabble in my trading account and will only see results ()+ or -) at the start of March
One question that has bothered me and I still have no clear external confirmation of my assumption
That is the fate of the options on settlement day. (expiry day)
If I have sold (written) an option and it is in the money at expiration, I am assuming that my brokerage account will settle the outstanding cost to me automatically. I.e. my account will be debited the option strike -+ the actual price of the underlying security x the muliplier x how many option units I sold.
Put strike 102
Underlying security price at expiration = 100
I option bought with a multiplier of 100
So 200 will be deducted from my account and transferred to the buyer/holder of the option on expiry day.
And conversely if I bought options and they come into the money, the funds from the seller will be transferred to my account respecting the same calculation as above.
So if I trade options and plan is to hold these positions till expiration, then I need not do anything with them. Allowing things to expire will trigger the settlement either as a debit or credit to my account depending on the result on expiration day.
That would mean that the fees charged by my trading account will only be incurred at the time I take out my trade position.
Is my understanding correct?
Would love to hear others opinion.
Thanks and hope to be a contributing member to this forum in the future.