Unit 4 · Level 2 · Managing the book
Assignment & expiration
Expiration is where paper positions become real shares. In-the-money options are exercised automatically at expiry (typically if ITM by even a cent). 'Pin risk' is the nasty edge case: the stock closes almost exactly AT your short strike, and you won't know until after the weekend whether you've been assigned. Assigned Friday means holding shares over the weekend, and Monday can gap. The fix is unglamorous: don't carry short options through expiry when the price is hugging your strike.
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What you get asked
What is pin risk?
At €49.98 versus a €50 strike, some holders exercise and some don't. You find out your share position after the market can no longer help you fix it.
The classic 'weekend surprise' for a spread seller is…
Your defined-risk spread can briefly become a real share position with real overnight risk. The definition of risk on the ticket assumed you weren't holding stock through a gap.
Options that finish in the money are typically ___ automatically at expiration.
Auto-exercise is the default at virtually all brokers for ITM options. If you don't want the resulting shares, close the position before Friday's bell, not after.
Order a clean expiration-Friday routine for a spread seller
Ten minutes of Friday housekeeping deletes the whole category of weekend surprises. Professionals treat expiry as a checklist, not an event.
When is EARLY assignment on a short call most likely?
A call holder exercises early to capture the dividend when the remaining time value is worth less than the payout. Covered-call and condor sellers should know their dividend calendar. 🐜
The rest of this unit
Rolls, profit rules, assignment surprises: running a spread book like a professional.