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 answering the question, “Why do all out of the money options expire worthless?” This is a common question that I get, honestly from newbies and the question is, “Well, why do these things expire worthless? Why don’t they have any value at expiration? Why do we, in many cases, leave these out of money option contracts on to expire worthless? Whether they’re long contracts or short contracts, why don't we just let them go through the expiration cycle or choose to exercise those contracts and deal with the shares?” I want to use an example which hopefully will illustrate this point very clearly as to why these option contracts expire worthless when they’re out of the money. Let's say that you have a stock that’s trading at $100 and you buy a 105 call option on that stock. You might buy that call option. Of course, since we’re at Option Alpha and we do option selling, we might be the person that sells you that