How does IB handle debit and / or credit spreads that are in the money at expiration? Are profitable legs exercised or just let to lapse?
Found the answer: https://ibkr.info/article/1718 Do I have to notify IBKR if I want my long option exercised? In the case of exchange listed U.S. securities options, the clearinghouse (OCC) will automatically exercise all cash and physically settled options which are in-the-money by at least $0.01 at expiration (e.g., a call option having a strike price of $25.00 will be automatically exercised if the stock price is $25.01 or more and a put option having a strike price of $25.00 will be automatically exercised if the stock price is $24.99 or less). In accordance with this process, referred to as exercise by exception, account holders are not required to provide IBKR with instructions to exercise any long options which are in-the-money by at least $0.01 at expiration.
If I'm long a leg that is ATM at expiration, I'll always close it, replace with long/short stock if necessary. It should at least have a little extrinsic value at that point to make the trade worth it.
Be careful if you try to squeeze out every bit of time value on expiration day. IB will close out ITM legs at about 2:00 PM CST, if your Post-Expiry Margin runs too high. What is expiration exposure? Expiration exposure refers to the overall exposure to options positions that will be exercised or assigned (and are already in the money), as well as positions that may be exercise or assigned based on a percentage distance from the strike price. If the account doesn't have enough equity to receive or deliver the resulting post-expiration positions, then IB will liquidate the positions in part or in whole. This basically means that IB will prohibit the exercise of equity options and/or liquidate short option positions if the effect of the exercise or assignment would be to place the account in a margin deficit. While the purchase of an option generally requires no margin since the position is paid in full, once exercised the account holder is obligated to either pay for the ensuing long stock position in full or finance the long or short stock position. Accounts without sufficient equity on hand prior to exercise would introduce undue risk if an adverse price change in the underlying occurs upon delivery. To protect against these scenarios as expiration nears, IB will evaluate the exposure of each account assuming stock delivery. If the exposure is deemed excessive, IB will: Liquidate options prior to expiration; or Alow the options to lapse; and/or Allow delivery and then liquidate the underlyin. In addition, the account may be restricted from opening new positions to prevent an increase in exposure. Account holders may monitor this expiration related margin exposure in the TWS Account Window. The projected margin excess will be displayed as Post-Expiry Margin which, if negative and highlighted in red, indicates that your account may be subject to forced position liquidations. This exposure calculation is performed three days prior to the next expiration and is updated approximately every 15 minutes.
That only applies if you are using up literally all your margin right? I'll quit before my stack ever gets that small