At expiration, an option's extrinsic value should be zero so why is there a difference between bid (which has negative value as in the example below) and the ask (which has still value over its intrinsic value)?

For example, here is SDC stock on September 10th. It closed at $5.15. In dollar cost, the $5 call option bid closed at $13 (13-15 = -2) and the ask was $22 (22-15 = +7). This happens frequently (not just this example). What is the explanation?

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1 Answer 1


There has to be some meat on the bone to incentivize a counter party to take the other side of the trade at expiration. For ITM options, the bid is discounted from intrinsic value and some time premium is added to the ask price.

If you are long ITM options, the only way for you to avoid this haircut is to exercise them, assuming that your closing costs are less than the amount that you are saving.

If they are OTM or you are short the options, you'll have to accept the haircut if you want to close your position before expiration.

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