InvestorQ : I have bought an option and paid the premium, how does it get settled?
Anamika Sodhani made post

I have bought an option and paid the premium, how does it get settled?

Answer
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Anamika Sodhani answered.
2 years ago


Option is a contract, which has a market value like any other tradable commodity. Once an option is bought there are following alternatives that an option holder has: You can sell an option of the same series as the one you had bought and close out /square off your position in that option at any time on or before its expiration date. You can exercise the option on the expiration day in case of European Option or; on or before the expiration day in case of an American option. In case the option is "Out of Money" at the time of expiry, one will not exercise his option, not being profitable and therefore, it will lapse or expire worthless.