Question

There are three things that an owner of an option can do with their option. What are those three things?

Answer 1

The three things that an owner of an option can do with their option are as follows:-

1.Sell it prior to the expiration date:- An option owner can sell the option he is owning ,prior to the expiration date .The difference between the selling price and the purchase price of the option is the gain of the option owner in such scenarios.Option value keeps on changing day by day due to change in underlying stock prices.Only the American style options are excercised prior to the expiry.European option cannot be excercised before the expiry.

2.Let it expire,and it automatically exercises:-Sometimes the options are excercised by the brokers of the option owners on the expiry if the option is in the money.So these are a type of excercise of options on expiry when the options are in the money and excercisable.

3.Let it expire with no value:-When the option is expiring and it is still out of the money, it will most probably expire as a worthless option and the complete amount paid for the purchase of the option will be lost as it is not able to recover any amount.The complete money paid would be lost in such scenarios.

So these are the three things the owner of an option can do with their option in different circumstances.