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Say I sold a BABA put expiring 5/24 . The usual advise is to close at 50% profit.
What If I leave my position open until the expiry date. The put option will be expiring with no value for the other person holding a long position.
My broker usually shows me a price of 0.01$ or no price at all. I'm wondering what makes the other party to sell instead of just leave it expire with no value.
Will my order easily be processed at the expiry date locking 100% profit ? Thanks

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If the put is about to expire "with no value for the other person holding a long position" then it expires for you as well.

Worthless OTM options can usually be purchased for 5 or 10 cents very close to expiration. The incentive for the seller is to salvage some money. If you are rolling the short option out, you can often pay less than 5 cents if it's part of a combo order.

A more difficult problem is if it's late in the year and you want to sell a worthless option (to close) that has a zero bid so that you can deduct the loss this year. This can be done in combination with another option but it will cost 5-10 cents or so.

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The option expires and disappears on the expiration date. That's it. Very simple.

By "sold a put" I think you mean "wrote a put" - which means someone else can sell their shares to you at a fixed price until the expiration date.

If that price (the strike price) is above the market price, they will make money by doing so and the options are "in the money." Your counter-party should exercise the options before the expiration to capture this money. Usually it's best to wait until the last moment to do so, but not necessarily.

Otherwise, if the strike price is below the market price, they will not make money by exercising and should just let the options expire. You still keep the option premium, of course.

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  • If the strike price is above the market price, there will be salvage value for the put's owner. That doesn't mean that his position is profitable. If there is time premium remaining, it makes more sense to sell the option rather than to exercise it. The exception would be a deep ITM option that trades for less than its intrinsic value. It is not better to wait until the last moment because the underlying's price can move against you.
    – Bob Baerker
    May 20, 2021 at 18:03
  • @BobBaerker Why would a deep ITM American option ever trade for less than its intrinsic value?
    – Flux
    May 20, 2021 at 18:36
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    @Flux - What incentive would a market maker have for buying a deep ITM option from you for its intrinsic value? You're at their mercy if there's little to no trading in such options. If you want to see this IRL, pull up a real time option chain and look at the bid price of deep ITM options that are near expiration.
    – Bob Baerker
    May 20, 2021 at 18:53

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