Expiry, exercise & settlement
What actually happens on the last day, and how contracts resolve.
Every option has a last trading day, its expiry. After that the contract is gone. What it is worth at that moment depends only on where the stock finished relative to the strike. In-the-money contracts are exercised or settled; out-of-the-money contracts expire worthless.
What happens at expiry
- ITM at expiry — the option has value and is automatically exercised (or cash-settled to its intrinsic value).
- OTM at expiry — the option expires worthless. The premium you paid is lost in full.
You rarely need to exercise
Most traders sell to close before expiry to capture the option's remaining value, rather than exercising and dealing in 100 shares. Selling is simpler and captures any leftover time value.How the Arena settles options
In the Arena, a contract that crosses its expiry date auto-closes at its intrinsic value against the expiry-day close — worthless if it finished OTM. Same-day (0-day) contracts are not offered, because a contract expiring on the current bar can no longer be entered.