Ask the Institute

DATE: June 11, 2001

Is it true that selling options is the only way to make money since 90% of options expire worthless?

Contrary to what many people think, the vast majority of options do not expire worthless. The facts are as follows: approximately 10% of options are exercised, from 55% to 60% of option positions are closed prior to expiration, and about 30% to 35% of options expire worthless. Note that 90% of options go unexercised, which is very different than expiring worthless. It should also be noted that this says nothing about profitability. Option positions closed prior to expiration may be profitable or unprofitable. Options that expire worthless may not be unprofitable if they were part of a strategy that involved other securities such as covered call writing.