I'm new to options trading. Let's say i buy a CALL option and upon expiry its in the money, what happens after that? Will my options be automatically exercised or will my options position be automatically closed? I am using Thinkorswim, if that helps.
If it is in the money, you should sell it on the options expiration day assuming you do not want to take delivery of the stock. Otherwise, if you allow it to expire in the money, TD Ameritrade which owns the ThinkorSwim application will exercise the option automatically. That means you need to have monies in your account to buy those shares. By just selling your options to close it, you avoid having to buy those shares.
I don't carry a high balance in my options account. A few months ago, I had bought some super cheap otm puts in a stock that had a large range that week. With 5 minutes left it was flat lining 5 points out of the money. I stopped paying attention. I looked back 20 minutes after the market had closed and the stock had dropped 5.5 points with 3 minutes left leaving me 50 cents in the money on 5 contracts. I called Schwab and they had already marked my options DNE.
If you had the Buying power and it was before their cut off, you should have be able to buy stock in the aftermarket and file an exception. Without the available BP, nothing you can do.
the key , I believe, is that if you bought deep in the money, it will be exercised at that price and you end up losing all the intrinsic value which could be a huge loss.