Short Options in and out of the money at expiration

Q: What happens if I hold a short option into the expiration that is in or out of the money?

A: If you hold a short option into expiration that is either in the money or out of the money, your evaluation will end in failure. 

Q: What is a short option?

A: A short option refers to a situation in which you have sold an options contract, giving someone else the right to buy (in the case of a call option) or sell (in the case of a put option) an underlying asset from you at a predetermined price.

Q: What does “in the money” mean?

A: “In the money” is a term used to describe a situation where the current market price of the underlying asset is favorable for the option holder to exercise their option. In the case of a call option, this means the market price is above the option’s strike price. For a put option, it means the market price is below the strike price.

Q: What does “out of the money” mean?

A: “Out of the money” refers to a scenario in which the current market price of the underlying asset is not favorable for the option holder to exercise their option. For a call option, this means the market price is below the strike price. For a put option, it means the market price is above the strike price.