# After you exercise a call option to buy at $90, how can you have another 30 seconds to buy at \$89.95?

I don't understand this example of Pin risk (options) - Wikipedia.

1. When the call buyer exercised, wouldn't $$\color{limegreen}{\text{exercise}}$$ have automatically and instantly bought him 1000 shares @ $90? 2. How does the call buyer have "thirty seconds before the close" to $$\color{red}{\text{buy back}}$$ IBM shares @ \$89.95?

For example, a trader is long 10 calls struck at \$90 on IBM stock, and five minutes before the close of trading, IBM's stock price is \$89.75. These calls are out of the money and therefore will expire worthless at this price. However, two minutes before the close of trading, IBM's price suddenly moves to \$90.26. These options are now in the money, and $$\color{limegreen}{\text{the trader will now want to exercise them}}$$. However, to do so, the trader should first sell 1000 shares of IBM at \$90.26. This is done so that the trader will be flat IBM stock after expiration. Thirty seconds before the close, IBM drops back to \$89.95. The calls are now out of the money, and the trader must quickly $$\color{red}{\text{buy back the stock}}$$. Option traders with a broad portfolio of options can be very busy on Expiration Friday. • Wikipedia is generally ok, but sometimes can be really crap, especially when it comes to science – user24980 May 19, 2020 at 11:08 ## 2 Answers This Wikipedia example is really poorly written, it basically implies that the option buyer doesn't have the option between exercising or not exercising, so he will have a risk of getting the shares or not getting the shares around the 90$ price. This is actually wrong as explained above in that same article, if the price is 90.01 the call buyer may well decide not to exercise. Only the option seller has a conditionnal pin risk (he has a chance of not being assigned either).

1. The call buyer would want to auto-exercise them at expiration if the price stayed above 90, but not "immediately", because he could profit more if the stock were to trade below 90. That option still has time value.

2. If IBM drops below 90 before expiration, the trader will buy back the stocks at 89.95 instead of exercising the calls at 90. "Thirty seconds" is just an example here.

Note that with auto-exercising, the option buyer has to actually opt-out to not be exercised, the default option is exercising.

1. Option exercise are usually processed after the close. When IBM price moves to 90.26, the trader wants to exercise it since the current price is greater than 90, but the final decision is made after close. When the stock price drops to 89.95, he would no longer want to exercise the option because now the price is less than 90.
2. No matter you have an option position or not, you can always trade stocks when the market is open.

The example is trying to explain what a trader needs to do so that he would have a flat position after the option expires.