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A call option5 gives the owner the right to purchase the underlying security; a place option6 gives the proprietor the right to sell the underlying security.

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The decision tree: Ways to approach expiration As expiration approaches, you have three choices. Depending over the situations—and your objectives and risk tolerance—any of these might be the best decision for you.

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5A call option gives the proprietor the right, although not the obligation, to order shares of stock or other underlying asset on the options contract's strike price within a specific time period.

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3. Roll it to something else. Rolling, which is essentially two trades executed being a spread, may be the third choice. A person leg closes out the existing option; the other leg initiates a fresh position. For example, suppose you're short a covered call on XYZ within the July 105 strike, the stock is at $103, and the call's about to expire.

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