Can both call and put option of the same strike price and same asset expire to zero on expiry date?
Can both call and put option of the same strike price and same asset expire to zero on expiry date?
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Rishi Sharma · External communityPost link
External question — Personal Finance Stack Exchange
Author: Rishi Sharma
Original post: https://money.stackexchange.com/questions/146828
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Suppose we are trading the call and put options for an underlying asset such as crude oil at a strike price of 1000. Will there be any scenario in which both the call option of strike price 1000 and the put option of the strike price 1000 for crude oil expire to zero on expiry day? What is the likelyhood of this happening?
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D Stanley · External communityPost link
External answer — Personal Finance Stack Exchange
Author: D Stanley
Original post: https://money.stackexchange.com/a/146829
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If the price of oil* settles at 1,000 on the day of expiry, then both puts and calls with a strike of 1,000 will have zero value (though either could also be exercised). That is the only scenario - if the price of oil is greater than or less than 1,000, then either the calls or puts will have value at expiry.
*Note that exchange-traded options on oil are technically options on
futures
that expire about a week after the options expire. So by "price of oil" we mean the "value of the underlying oil future".
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Quoted from Forex.com.bd-Editorial External answer — Personal Finance Stack Exchange Author: D Stanley Source score (net votes, not local likes): 1 Original post: https://money.stackexchange.com/a/146829 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. If the price of oil* settles at 1,000 on the day of expiry, then both puts and calls with a strike of 1,000 will have zero value (though either could also be exercised). That is the only scenario - if the price of oil is greater than or less than 1,000, then either the calls or puts will have value at expiry. *Note that exchange-traded options on oil are technically options on futures that expire about a week after the options expire. So by "price of oil" we mean the "value of the underlying oil future".
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