Options mechanics
What is Pin Risk and why is it dangerous to hold OTM options into Friday’s 4:00 PM close?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Pin risk occurs when a stock closes exactly at or very near the strike price at expiration, making it unclear whether the option will be exercised, creating uncertain post-close exposure.
How it works
Because exercise decisions are due shortly after the Friday close while the stock can still move in after-hours trading, holders near the strike face unexpected assignment or non-assignment surprises.
An example
If XYZ closes at exactly 50.02 against a 50 strike, holders cannot be certain overnight whether their short option will be assigned until Monday's account activity is confirmed.
Risk & limitations
To avoid pin risk, many traders close or roll options near the strike before expiration rather than letting borderline contracts ride into the settlement process.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.