What Is “Pin Risk” in Options Trading?

Pin risk occurs when the price of the underlying asset closes exactly at or very near the strike price of an option at expiration. This creates uncertainty for the seller (writer) of the option, as they do not know whether they will be assigned the underlying shares.

If the option is a call, the writer doesn't know if they will have to sell their shares. This uncertainty makes it difficult to manage the position and can lead to unexpected losses or unwanted stock positions over the weekend.