SIE Exam Question 55: Answer and Explanation

Question: 55

If an option expires without hitting its strike price, what happens to the buyer and seller?

• A. The seller keeps the premium received and the buyer loses the premium paid.
• B. The seller keeps the premium received and loses the shares of the underlying security.
• C. The buyer loses the premium paid, but receives the shares of the underlying security.
• D. Nothing happens.

Correct Answer: A

Explanation:

If an option expires without hitting its strike price, the seller keeps the premium received and the buyer loses the premium paid.