The Exchange determines whether an option is in-the-money or out-of-the-money for automatic exercise purposes based on the difference between an option’s strike price and the actual settlement price for its underlying futures contract, even if that settlement price is constrained by price limits1.
For example, suppose August Soybean Meal futures settle limit down on option expiration day at $427.80 per ton. Further, suppose the option market is suggesting a synthetic value for August Soybean Meal futures of $417.90 per ton. Under this hypothetical scenario, a $420 call option would be deemed in-the-money and would be automatically exercised. Similarly, a $420 put option would be deemed out-of-the-money and would not be automatically exercised.
CME Group is the world's leading and most diverse derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.