SIE practice questionmediumOptions expiration
If a call option is out of the money at expiration, what happens?
- AThe seller pays the premium
- BIt is automatically exercised
- CThe buyer receives the stock
- DIt expires worthless✓ Correct answer
Explanation
Why D — It expires worthless
When out of the money, the option is not exercised and becomes worthless. Automatic exercise (B) only occurs if in the money; C and D are inaccurate.
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