Series 66: Settlement: Exercise, Liquidation, And Expiration

Settlement: Exercise, Liquidation, and Expiration

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.