How Close Expirations Can Complicate Your Trade Outcome
Pin risk occurs when an option contract is about to expire, and the underlying stock is trading very close to the option’s strike price. This creates uncertainty for the option seller, especially if it's unclear whether the option will be exercised.
For example, suppose you sell a call option with a strike price of $100, and at expiration the stock closes at $100.01. Technically, the option is in the money and may be exercised. But there’s no guarantee it will be. You won’t know for sure until the next trading day, when exercise and assignment details are processed.
That creates a problem.
You could go into the weekend thinking your position expired worthless, only to discover on Monday morning that you were assigned. That could mean:
Pin risk is especially common with short options near expiration, and more likely on weekly contracts with high trading volume. It’s a situation where price precision works against you. A few cents in either direction can trigger an exercise—or not—and that uncertainty is the risk.
Experienced traders often avoid holding short options to expiration if the stock is near the strike price. Closing the position early removes ambiguity and gives you control over the outcome.
The key takeaway: don’t let the market decide for you. If the position is too close to call, close it out manually. It’s not worth the surprise.
The truth is, small risks like this can quietly derail a good trading plan—unless you know how to manage them.
That’s why SlingShot Trader teaches a practical, disciplined approach to options. You’ll learn:
Slingshot Trader is built for traders who want real-world clarity, not theory. If you're ready to trade smarter and avoid surprises like pin risk, this is where you begin.
Learn more about Slingshot Trader →
