Put options give you the right but not the obligation to sell the underlying shares at the strike price on or before expiration. A put option is considered in the money if the strike price is higher than the current stock price.
If you own a put that is in the money at expiration, it will be automatically exercised. That is, the terms of the put contract are enforced such that you must sell the underlying shares for the strike price. Because your put is in the money, it is automatically exercised. Your broker should warn you usually a few times during expiration week that you own in-the-money options that will be exercised at expiration.
Less cash is involved and commissions are lower as well. In short, less mess. If you are the option seller , you will get exercised if your sold option expires in the money. In fact, this can happen at any time. Technically a put option can be exercised whenever the buyer wants, although it would be foolish to do so for one that is out of the money. Even in-the-money put options with a good deal of time value in the premium can be exercised, although doing so gives up the time premium.
So be aware of that when selling options, and be prepared to carry out the terms of the option contract. Double Your Money on the Rumor AND the News — Learn how to cut through the rumor and manipulation surrounding corporate earnings announcements and bank money-doubling option trades all year long. Download our FREE trading guide here. Article printed from InvestorPlace Media, https: Hot stocks to watch this morning: Breaking news sponsored by.
So what happens to in-the-money puts at expiration? The end result, however, is essentially the same. Selling Put Options and Expiration If you are the option seller , you will get exercised if your sold option expires in the money.More...