Let's say I sold some Feb 20 option that is out of money, shall I close my positions before market close today? What if I long some Feb 20 option that is out of money, shall I close my positions before market close today?
In an imaginary trade, let's say I sold 1 contract of BAC Feb 20, @2.5 put, and today the market closes at $2.6 for BAC. What will happen to the put I wrote? Thanks!
Your question is so basic and shows your utter laziness and lack of proper reading, you should start here:
Please, quick confirmation please. My answers to my own questions are: Since the options are out of money, I as a writer should be safe.
1) If an option you wrote is OTM when the market closes, you are PROBABLY safe. However, news does happen after the close and before the cutoff time for exercising options. Thus the stock may close at 2.60, but could easily be trading much lower than 2.5 after the market closes. Most individual investors would be unaware, and allow their long puts to expire. But the market makers who own such options would exercise them. The probability of all this is small. But why in the world would you take this chance? And more than that, why would you wait until today to consider closing the position? Could you have paid a few pennies last week? Over the long-term, it's a bad idea to try to collect the last nickel, or even the last few nickels on a trade. For example, today,I covered some Apr and June call spreads I sold earlier. To me it makes no sense to wait for options to expire. 2) If you own the options, do as you please. Yes, I would try to sell, but you may decide to take a chance on the last couple of hours. I also agree that if you need confirmation on something this basic - you are not ready to trade using real money. Best regards, Mark