SIE practice questionhardOptions expiration
If an option expires in the money but is not exercised, what happens?
- AThe writer pays the buyer the premium again
- BThe holder automatically receives intrinsic value
- CThe holder loses the premium and any intrinsic value✓ Correct answer
- DAssignment is mandatory
Explanation
Why C — The 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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