The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What happens to an option when it expires?” The simple answer to this is that the option ceases to exist. When an option contract expires, it no longer exists. And what’s important about this is not the fact that it just no longer exists, but that if the option contract is out of the money, there’s nothing left in the contract and it literally disappears. If you have a contract that’s out of the money, it expires with no value whatsoever. It doesn’t matter if you’re short the contract, if you’re long the contract. If the contract you were trading was out of the money, it has absolutely no value. If you were trading a contract that goes through expiration and expires in the money, then what happens is that that contract, the option contract itself no longer exist, but before that happens, the contract is converted at the terms of the original option contract. For example, if y