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SIE: Options
SIE practice questionmediumOptions expiration

If a call option is out of the money at expiration, what happens?

  1. AThe seller pays the premium
  2. BIt is automatically exercised
  3. CThe buyer receives the stock
  4. DIt expires worthless✓ Correct answer
Explanation

Why DIt 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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