Expiration risk
Definition · Level 3 · Spreads & short options
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Holding a spread into expiration with only the short leg in the money: it is exercised into stock while the long leg expires worthless, leaving an unhedged position until the next open.
Example
Short 100/105 calls, stock closes at 102 → short 100 shares on Monday with no 105 call to cap them.
Where Tradecraft teaches it
Level 3 · Spreads & short options, in the lesson “Assignment, pin and expiration risk”: Early assignment on short legs, dividend risk, exercise by exception, pin risk and the one-leg-ITM trap.
Related terms
- Dividend riskChance that a short ITM call is exercised on the last business day before the ex-date, leaving you short stock that owes the payout.
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- Buying-power reduction (BPR)Capital a broker sets aside to hold a position.
- Calendar Spread – DebitSell a near-term option and buy a longer-term option at the same strike.