Series 7 practice questioneasyOptions — Exercise by Exception
The OCC's exercise-by-exception rule automatically exercises options that expire in-the-money by at least:
- A$0.01✓ Correct answer
- B$0.05
- C$0.25
- D$1.00
Explanation
Why A — $0.01
Under the OCC's exercise-by-exception rule, options that are in-the-money by $0.01 or more at expiration are automatically exercised unless the holder provides contrary instructions. This ensures that valuable options are not inadvertently allowed to expire worthless. Holders must notify their broker if they do not want automatic exercise.
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