SIE practice questioneasyOption expiration
What happens to an option that is out-of-the-money at expiration?
- AIt pays a dividend
- BIt must be exercised
- CIt expires worthless✓ Correct answer
- DIt is automatically sold
Explanation
Why C — It expires worthless
Options that are out-of-the-money at expiration have no intrinsic value and expire worthless. They cannot be exercised for a profit; the other options describe incorrect outcomes.
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