Vertical spreads
How do I manage a vertical credit spread when the underlying price trades directly between the two strikes at expiration?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
When the stock closes between the two strikes of a credit spread at expiration, the short option is typically assigned while the long option expires worthless, resulting in a stock position the trader must manage, often requiring quick action to close or hedge before the next trading session.
How it works
This outcome, sometimes called pin risk, can leave a trader unexpectedly holding or shorting shares over a weekend or holiday if not addressed promptly after expiration.
An example
If a $50/$55 call credit spread closes with the stock at $52, the $50 call may be exercised against the seller while the $55 call expires worthless, creating a short stock position.
Risk & limitations
OCC disclosures note exercise and assignment notifications may not be confirmed until after markets close, leaving limited time to manage resulting stock positions.
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.