Shouldn't OTM call expire close to zero?

Discussion in 'Options' started by qlai, Jun 6, 2025.

  1. qlai

    qlai

    I did not get assigned, but I sold it at $10 mid-week and it closed around $15 while being OTM! Freaking options :)

    Here's a good recent example of exercise risk I thought would be helpful to share ( I believe Trump Tariff announcement after market closed):

    "Felix Frey has started a new topic.
    Learn this lesson...
    Posted Apr 03 in the Investor Discussions category

    Imagine you bought 20 SPY 0DTE put spreads for cheap (ex. $559-560ps for $0.20) thinking you might be able to catch a drop at 4pm. You could sell if it went lower.

    At 4:15pm EST, the SPY ripped higher and your spread expired at $0.

    15 minutes later, the SPY is down 3%, about to break $550.

    You are stuck.

    Unless you have 2,000 X $560 or $1,120,000 in the account you can't exercise.
    BUT, someone can exercise against you making you long 2,000 shares of SPY at $560.

    At $550, you are down $20k, and you have to wait until tomorrow to sell them. Btw, they will be sold by the brokerage at the market.

    I wonder how many people are caught in this?

    There were about 2.7mm 0DTE Puts traded today.
    How many didn't bother covering their puts at $0.01?"