A risk faced by option traders at the end of the exercise period of an option contract when the commodity is trading near the exercise price, or strike price. If a buyer does not exercise the option, the writer keeps the premium as profit. When pin risk occurs, the writer cannot be certain what the purchaser will do and must make a decision whether or not to cover his position by buying opposing options. Regardless of his decision, he faces a potential for loss.
Related information about pin risk:
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