At expiration, an option that is in the money by $0.01 or more is exercised unless someone says otherwise: that is the exercise-by-exception threshold The Options Clearing Corporation applies to equity options in customer, firm and market-maker accounts, and to index options in all account types, published in OCC's options exercise FAQ. The cutoff that decides whether "otherwise" arrives in time is 4:30 p.m. Central Time, the exchanges' deadline for receiving an exercise notice, and brokerage firms set earlier internal deadlines to meet it.
The threshold is a default, not a service
Exercise by exception is a procedure between OCC and its clearing members, and the same FAQ states that it relieves them of entering individual instructions while not removing the customer's need to communicate instructions to a broker. A penny in the money triggers it; a penny out of the money does not. A contract that expires with no intrinsic value and no instruction simply lapses, and the premium paid for it is spent.
Exercise style decides how long the decision stays open. All standardized equity options are American style and can be exercised on any day the market is open before the expiration date, while most index options are European style and can be exercised only on the last trading day, according to OCC's exercise FAQ.
Settlement style decides what arrives
An equity option that is exercised delivers shares. An index option delivers cash. Cboe's SPX specifications state that exercise results in delivery of cash on the business day following expiration, and that the exercise-settlement amount is the difference between the exercise-settlement value and the strike price, multiplied by $100.
Which price becomes that settlement value depends on the series. For traditional SPX contracts the value is calculated from the opening sales price of each component security on the expiration date; for SPX Weeklys and End of Month contracts it is calculated from the last reported sales price on the day the options expire, the same specification sheet says. Cboe's XSP specifications set the Mini-SPX settlement value at one-tenth the official closing price of the S&P 500 on the last trading day of the expiring series, again multiplied by $100.
Three S&P 500 contracts, three deadlines
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| Contract | Settlement timing | Last trading day | Settlement value source | Approximate notional at index 6,500 |
|---|---|---|---|---|
| SPX | A.M. | Business day before expiration, usually Thursday | Opening sales prices on the expiration date | $650,000 |
| SPXW (Weeklys, End of Month) | P.M. | Expiration day, 3:00 p.m. Chicago | Closing sales prices on expiration day | $650,000 |
| XSP (Mini-SPX) | P.M. | Expiration day, 3:00 p.m. Chicago | One-tenth the S&P 500 official close | $65,000 |
Those notional figures and settlement rules come from Cboe's SPX and XSP specification sheets. Two contracts on the same index expiring in the same week stop trading on different days, which is the practical reason the deadline is a contract-level fact rather than a calendar habit.
Example: an SPX call at settlement
Assume an SPX 6,450 call bought for 30.00 points, and an exercise-settlement value of 6,500.00. Both levels are assumed; the multiplier and settlement rule are from Cboe's SPX specifications.
Settlement amount: (6,500.00 - 6,450) x $100 = $5,000, delivered in cash on the business day after expiration. Premium paid: 30.00 x $100 = $3,000. Net result: $5,000 - $3,000 = $2,000, before fees. Had the settlement value printed at 6,440.00, the call would have finished with no intrinsic value, and the $3,000 premium would be the whole result.
Note where the risk sits. The SPX settlement value is built from opening prices on expiration day, after trading in the contract has already stopped, so the final number is not one a holder can trade against.
What the calendar does to premium
Time value is any premium in excess of intrinsic value before expiration, and it ends at zero. The decomposition is worked through in what is inside an option premium, and what happens when a holder acts on the remaining intrinsic value is in exercise and assignment are different events.
One deadline, three separate clocks: the contract's last trading day, the exchanges' 4:30 p.m. Central Time notice cutoff in OCC's FAQ, and the broker's own earlier deadline.
Source references
Primary sources used for this guide. Follow the links for the original scope, definitions and conditions.
- Options Exercise FAQAccessed 2026-09-17
- SPX Index Options product specificationsAccessed 2026-09-17
- XSP Index Options product specificationsAccessed 2026-09-17