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Pin Risk

Pin risk is the uncertainty an options seller faces when the underlying stock closes at or very near the strike price of a short option on expiration day. Because long holders can submit exercise instructions after the 4:00 PM market close — and because the stock can move in after-hours trading — the short cannot know until Monday whether they have been assigned. Assignment creates an unplanned stock position with full weekend gap risk attached.

HOW IT WORKS

An American-style option expires at the close on its expiration date, but exercise instructions are accepted until 5:30 PM Eastern. The Options Clearing Corporation auto-exercises any contract finishing at least $0.01 in the money based on the 4:00 PM closing price; however, long holders may still manually exercise based on after-hours moves regardless of the closing print. This creates a boundary problem: a stock closing at $249.98 appears safe, but a post-close announcement that gaps shares to $260 can trigger manual exercise and assign the short seller anyway. Pin risk is not directional — it is purely a mechanics risk about not knowing your position heading into the weekend. It is most acute for short options within roughly $1.00 of the strike in the final hour of expiration Friday, and for spreads where the underlying lands between the two strikes, potentially converting a defined-risk trade into an unintended naked stock position.

IN TAPEBOARD

Tapeboard flags pin risk exposure in the positions panel when a short option is within a configurable strike-proximity threshold — defaulting to $1.00 — as expiration approaches. The expiration heatmap highlights strikes with elevated open interest, making it straightforward to identify where pinning pressure is likely. Traders running covered calls or the wheel strategy can use the expiration timeline view to set alerts for the final hour of trading, prompting a decision to buy back the short before the close rather than carry assignment uncertainty over the weekend.

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