option expires?

Question

what happens when my option put expires? do I sell it before the expire date or just let it happen and then what? btw, it is almost worthless now. it expires this month.

Additional: my mistake, my option trade is not put, it's call. the price i paid for it is 1.30, it is now .16, expires this month. what to do now?

Answer 1

Exchange traded options in the US expire on the Saturday following the third friday of the month. Yours should expire on March 17th.

You have three options:

1. Exercise the options.

You would only do this if the stock price is below the strike price, you own the stock and want to get rid of it.

2. Sell the options.

This is what most people do if the options are worth something. You say that your options are almost worthless. If they are worth less than the transactions costs of selling them, then you should not sell. If they are worth more, you should consider selling them.

3. Let them expire.

If you do nothing, the options expire worthless. There are no transactions costs for you if you let them expire. If the options are worth less than what it costs you to sell them, let them expire.

Answer 2

If your put options have value, you probably want to just sell it before it expires. It all depends on your threshold for pain and on what you think the stock'll do between now and then on whether to let it ride or not.

Most stocks/indexes are heading down at the moment which should help your put option. However, you're also losing time decay at the same time, meaning that even if the stock/index continued to decrease, your put option might do the same.

Since you have a put option, it gives you the right to sell your stock at a predetermined price. If your put has value (Typically > 0.05) at expiration, your broker will exercise your option and sell your stock for you at the strike price, or you'll end up with a bunch of shares in your account that are short.

Then again, some brokers won't let your acct get to that point. They'll exercise their option to sell the put for you on expiration day so that your account isn't holding 100 shares of GOOG or whatever, and being exposed to a big risk come Monday.

In any event, most people don't want to deal with having to buy back the stock or index the following monday, especially if they have a small account where they "have" to resolve their exercised options first before being allowed to buy/sell any other items in their account.

Sorry for the long explanation. Hope it helps!

Answer 3

Option put bought can expire either 'in the money' meaning the price of stock on which the option is bought has gone below the strike price or 'out of the money meaning the stock on which the put has been bought has price above the strike price. In the former case you can let it expire if on expiry it is still in the money you can pocket the difference between the strike price and the price of the stock on expiry.
If it is the latter case you will loose the premium you paid for buying the put. If you let it expire then maximum you loose will be only the premium you paid for the put option buy.
You can also do one thing in the latter case, if the strike remain out of money close to expiry you can sell the bought position to close, in which case you will get the premium and if on expiry it is still out of money you can pocket the premium and your loss will be the difference between the premium which will be marginal. If it then goes into money the broker will do a benevolent sale for you and you won't loose much.

Answer 4

If the option is in the money when it expires, it will automatically be executed for you. The exchange will purchase the stock and put it in your name. There is a threshold of something like 25 cents. In other words if the value is below the threshold it will not be automatically executed. If you have a put you are sitting pretty.