Graphic Example
Looking at the imaginary example below, ABC is valued at $44.25 at the strike price. If this is a one hour call option, the investor ended in the money. You can see that at the expiration time of 2pm ABC was valued at $44.45, which is the strike price.
If this had been a one hour put option, it would have expired out of the money. As you can see, ABC is valued above the strike price at expiration. |
It should be noted that it does not matter what the magnitude of the gain or loss of the underlying asset is. If you purchase a call option on ABC, it does not matter if the stock expires .01, or 100 points above the strike price. The profit will be the same. The same can be said of a loss. If ABC expires below the strike price on a call option, it doesn't matter the magnitude of the drop in value. You will lose the entire investment in most cases.
