I was wondering about the following scenario: assume that you have a underlying which trades under a positive bid-ask spread $S^B \leq S^A$ and that there is also a European Call-Option on this underlying available.
Now assume that at maturity we have that $S^B=90\$, S^A=110\$$ and the strike of the option is given by $K=100\$$. Is this option exercised?
On the one hand, the option gives me the right to buy the underlying for $100\$$ (instead of $S^A=110\$$) so the owner of the option would exercise the option and one could argue that the payoff at maturity is given by $(S^A-K)^+$.
On the other hand, if the owner of the option does not want to possess the underlying, then there is no reason to exercise the option: because once he/she pays $100\$$ to buy the underlying, he/she would only get back $S^B=90\$$ after selling the underlying. Thus, one could argue that the payoff at maturity is given by $(S^B-K)^+$.
I realize that the question might not have only true answer. But I would be interested in how this is handled in practice: is there something like a mid-price $S^M \in [S^B,S^A]$ which determines the pay-off, i.e. is the payoff at maturity given by $(S^M-K)^+$? Or is there a completly different approach?