What happens when an option reaches its expiration date?

When an option reaches its expiration date, it is evaluated to determine whether it will be exercised or allowed to expire worthless. If the option is in-the-money, the holder has the choice to exercise their right to buy or sell the underlying asset at the specified strike price. Conversely, if it is out-of-the-money, it will not be beneficial to exercise, and thus the option will expire worthless. The key aspect is that at expiration, an option does not continue to hold any inherent value or right; it is a definitive point where the option's future potential is resolved into either a transaction (exercise) or a complete loss of the premium paid (expire worthless).

This understanding clarifies the operational dynamics of options as they approach expiration, underscoring the importance of strategic decision-making based on the current market conditions and the option's status.