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.
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 of the following best describes a covered call?
- If an option is trading above its intrinsic value, the extra amount is called:
- If an investor owns 100 shares of XYZ and buys 1 XYZ put option, this strategy is known as:
- A call option with a $50 strike price and the underlying stock at $55 has what intrinsic value per share?
- A customer buys 1 ABC May 50 call and 1 ABC May 50 put. This position is called a:
- What does an investor who buys a put option want the price of the underlying security to do?
- An investor buys a call with a $40 strike and sells a call with a $45 strike. This is a:
- An investor who purchases a call option expects the price of the underlying stock to: