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.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Options questions
- Which Greek increases as an option moves deeper in the money?
- What is the breakeven point(s) for a long straddle with a $40 strike if each option is bought for $3?
- Which option will have the greatest time value, all else equal?
- A bear call spread’s maximum loss occurs if:
- A long put with a $25 strike is purchased for $2. What is the maximum gain per share?
- The maximum gain in a debit put spread is calculated as:
- A bull put spread profits most if the underlying stock:
- A trader simultaneously buys a March 50 call at $7 and sells a March 55 call at $3. What's the maximum profit per share?