If the holder of an option fails to exercise the option, the lapse of the option is considered a sale or exchange on the option expiration date.

Question

Quizplus · Accepted Answer

The lapse of an option is considered a sale or exchange on the option expiration date because the holder of the option has the right to sell or exchange the option for the underlying asset. If the holder of the option does not exercise the option, the option will expire and the holder will lose the right to sell or exchange the option for the underlying asset.

If the Holder of an Option Fails to Exercise the Option