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SIE: Options
SIE practice questionhardOptions expiration

If an option expires in the money but is not exercised, what happens?

  1. AThe writer pays the buyer the premium again
  2. BThe holder automatically receives intrinsic value
  3. CThe holder loses the premium and any intrinsic value✓ Correct answer
  4. DAssignment is mandatory
Explanation

Why CThe holder loses the premium and any intrinsic value

Options must be exercised to realize intrinsic value; otherwise, the holder loses both premium and intrinsic value. No automatic payment or mandatory assignment occurs.

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