What Is the Risk Associated with “Pinning” near Expiration?

"Pinning" occurs when the underlying asset's price settles exactly or very close to a heavily traded option's strike price at expiration. This can lead to significant risk for short option traders (market makers) due to uncertainty about whether the options will be exercised.

The high Gamma near expiration exacerbates this, leading to rapid, unpredictable Delta changes and potential hedging losses.