The following guidelines determine whether and when to exercise an option:[3] A common strategy among professional option traders is to sell large quantities of in-the-money calls just prior to an ex-dividend date.
The firm then carries out its obligation, and then selects a customer, either randomly, first-in, first-out, or some other equitable method who was short the option, for assignment.
That customer is assigned the exercise requiring him to fulfill the obligation that he agreed to when he wrote the option.
The price of the underlying security used to determine the need for exercise by exception is the price of the regular-hours trade reported last to the OCC at or before 4:01:30 pm ET on the day before expiration.
The OCC reports this price tentatively at 4:15 pm, but, to allow time for exchanges to correct errors the OCC does not make the price official until 5:30 pm.