![]() When you sell (“write”) an American-style option (call or put), you may be assigned at any time, especially the underlying asset if your option is in the money (ITM) on or before expiration day (and even slightly out of the money in special cases described below). A call option gives the owner the right to buy the underlying security a put option gives the owner the right to sell the underlying security. The buyer (“owner”) of an American-style option has the right, but not the obligation, to exercise the option on or before expiration. Here are a few things you need to know to avoid potential pitfalls and better understand the ins and outs of expiration day. If you’re new to options, and you don’t quite understand all the terminology and logistics, then expiration can also be a time of peril. ![]() ![]() In short, trading options on expiration day was seen as a time of opportunity and risk.Īlthough it’s become a more frequent occurrence, the last day of trading can still be a time of volatility as well as potential opportunity. ![]() In the early days of options trading-two or three decades ago-for market makers in the options trading pits in Chicago and other financial centers, there was one day a month in which attendance was virtually mandatory: the day before options expiration because volume was usually heavy and the potential for volatility was ever-present.
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