Home » Education » Basic Option Tutorial » What Happens To An Option
- OFFSET
The buyer sells the exact same option with the same expiration date, series and strike price. The seller buys the exact same option with the same expiration date, series and strike price. Any time before the option expires.
- EXERCISE
Only the owner of the option can exercise an option. In American style options an option can be exercised at any time. Generally only an option that is in the money (price higher than strike price for a call and price lower than strike price for a put) will be exercised. However, the owner has the right to exercise any options that they have purchased and it is not uncommon on the day of expiration to see options that are slightly out of the money to be exercised.
- EXPIRE
On the day of expiration options that are out of the money (and have not been exercised by the owner) will expire worthless and be taken off the books of both the buyer and seller. This is also known as abandonment.