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I bought some call options earlier this year that have dropped to zero value. I've tried several times to sell them at market, but I have seen zero buyers.

I would like to sell them or have them declared worthless this year so I can take the tax loss. Unfortunately, my broker seems setup to handle worthless stocks but not worthless options.

They are currently researching the issue and hopefully they'll find a way to dispose of them for me but the broker on the phone didn't sound very optimistic... Short of finding someone else to purchase my contracts for a penny (and paying a commission many times that).

Is there a standard way to get rid of worthless option contracts before their expiration date?

Thank you in advance for any help that you can give with this!

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  • 1
    Are the options truly worthless? Is the underlying stock worthless?
    – Chris W. Rea
    Commented Nov 29, 2016 at 0:17
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    Can't you just wait for them to expire and be subsequently removed?
    – quid
    Commented Nov 29, 2016 at 3:49
  • Try exercising them if they are American style options
    – CQM
    Commented Nov 29, 2016 at 8:01
  • @CQM I am pretty sure that the options have zero value because the strike price is now too high compared to the current price of the underlying security. Exercising them will probably be throwing even more money down the drain.
    – Mindwin Remember Monica
    Commented Nov 29, 2016 at 12:59
  • @Mindwin it will, depending on the liquidity of the underlying and the exercise fees, aside from that the broker will let you float the value of the underlying for a few days and will simply be locking in the known loss and not be increasing it
    – CQM
    Commented Nov 29, 2016 at 23:04

2 Answers 2

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Before the expiration date if there is no buyers, there is no market and you cannot sell them legally. When they will expire worthless, you will be able to claim a tax loss. Check this publication from IRS under options

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  • They expire in January of next year, but I would like to take the loss this year. I keep putting them out there at market, but can't even get rid of them that way. It would be great if someone, anyone would take them off my hands unfortunately I don't know a lot of option traders otherwise I would ask a friend to buy them and agree to do the same if they needed similar help.
    – bpowers
    Commented Nov 29, 2016 at 17:30
  • The loss cannot be claimed this year, period. This is income tax law. As for finding a "friend", I am not sure that kind of "friend" exists. Your loss is your loss, accept it.
    – Armando
    Commented Dec 2, 2016 at 13:35
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    The loss cannot be claimed this year, period. This is income tax law. That is incorrect. If he can sell the calls, he can deduct the loss. As for finding a "friend", I am not sure that kind of "friend" exists. Any friend with a brokerage account and approval to trade options could buy these calls from the OP. OP reimburses friend for the cost of the position. Problem solved.
    – Bob Baerker
    Commented Jun 8, 2020 at 21:34
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If your calls expire before the end of the year, just leave them be and they will expire. If they expire in the following year, you have a problem. Each day, you can try to sell them for a penny but the odds are slim that anyone is going to buy your worthless calls.

There is a way to get rid of them but it's going to cost you modestly. Find another call that is liquid and has a narrow bid/ask spread (the higher the strike price, the better). Execute a vertical spread order and then close the new leg. For example:

XYZ is $50. You own the Jan $60 call quoted at $0.00 x 0.05 . The Jan $50 call is $1.00 x 1.05. Place a combo order to buy the Jan $50/$60 vertical call spread for $1.05. If necessary bid $1.06 or $1.07, etc. If filled, you'll have sold your calls and bought the Jan $50 call.

Before placing the above order, open a ticket to sell the soon to be purchased Jan $50 calls. The moment you get a fill on the spread order, execute the second sell-to-close order at the market. All of this assumes that you get immediate execution notification. You'll have to monitor the position because you need to STC ASAP otherwise you'll add some market risk to the equation.

The cost to you will hopefully be no more than the B/A spread and if you're still paying commissions, three of them.

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