Series 65: 4.1.7.4. Settlement: Expiration, Liquidation, Exercise

4.1.7.4. Settlement: Expiration, Liquidation, Exercise

There are three ways in which an option contract can settle: it can be exercised, traded, or left to expire. If an option is in-the-money, an option buyer will at some point want to exercise the option or trade it. An option seller will prefer to see the option out-of-the-money where it will be left to expire.