TRIED & TRADED
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Exit 4 — holding to expiry

  • Holding to expiry is the exit where you do nothing.
  • It is also the control: any exit that can’t beat doing nothing is costing you money to run.

What it is

  • You open the trade and leave it.
  • It settles on expiry day, either worthless or in the money.
  • You collect the whole credit if it expires out of the money.
  • No decisions, no closing costs, no chance to change your mind.

Why it belongs on the list

  • Every other exit costs something — a spread crossed, a win cut short, a loser booked early.
  • Holding to expiry costs none of those.
  • So it is the baseline. An exit rule earns its place by beating this one, not by sounding prudent.
  • A test that never runs the baseline can’t say whether its exit helped.

What it actually costs

Doing nothing is not free. It is just that the costs arrive as risk rather than as fees.

  • The last stretch is the most dangerous. Gamma is largest in the final days, so the position can turn fastest exactly when you have stopped watching.
  • The capital stays tied up for the full tenor, which lowers how many trades a year you can run.
  • A short option in the money can be assigned, and on a spread that is a mechanical mess even when the maths still works out.
  • Pin risk is real. A stock closing near your short strike leaves you unsure over the weekend whether you were assigned.

The reward for holding is the last few cents. The risk you carry for them is the whole position.

Where it bites

It flatters the win rate

  • Held to expiry, a far out-of-the-money credit trade wins most of the time by construction.
  • The losses are rarer and larger, which is the shape most likely to be mistaken for skill.
  • A high win rate here is a description of the strikes you chose, not evidence that the strategy makes money.

And it is the easiest exit to model wrongly

  • At expiry an option is worth its intrinsic value, so a backtest needs no pricing model — which makes this the cheapest exit to simulate.
  • That cheapness is why so many published backtests hold to expiry without saying so.
  • If a study doesn’t name its exit, this is usually the one it used.
Read this before comparing two studies

A backtest that holds to expiry and one that closes at half the credit are not testing the same strategy, however identical their entries look. Comparing their headline numbers is the most common mistake in published options research.

Common questions

Is holding to expiry lazy?

It is the simplest choice and sometimes the right one. What it is not is neutral — it concentrates the risk into the final days and the results reflect that.

Do I get charged to let an option expire worthless?

Generally no, which is part of the appeal. Closing early means crossing a spread and paying a commission on a position that may be worth almost nothing.

What about the last hour on expiry day?

It is the most unstable part of the trade’s life. A stock a few cents either side of your strike is the difference between the full credit and an assignment.

Should a test always include hold-to-expiry as a comparison?

Yes. Without it there is no way to say whether the exit rule contributed anything at all.

How this shows up in our tests

No expiry-versus-managed comparison is published yet.

It is the spine of the exit ladder run: the same entries held to expiry, then closed seven other ways, on one scale. Hold-to-expiry is the control, and it will be reported even where it wins.

The hub

The seven ways
to exit

The alternative

The profit
target

The mechanism

Gamma risk
near expiry