Registered: Apr 2011
10-13-12 10:01 PM
Technically while the option expires on Saturday the OCC requires instructions by Friday at 5:30 or 6:30. I can't remember the time.
There was one trade I did where the govt was going to issue a report on Medicare on Friday evening. Expiring options priced in nothing. It was essentially free gamma.
But there's a reason why premium should exist. Just because an option is out of the money, doesn't mean you wont get exercised. You aren't trading max(s-k,0) but rather the right to buy stock which doesn't have to be optimally done. This risk is worth money for an option that's a little out of the money.