So here's something I've noticed a lot of traders overlook – and it can cost them real money. Most of us plan our options trades assuming we'll either close before expiration or everything settles cleanly in or out of the money. But that's not always how it plays out, especially when you've got positions sitting right on the edge.

The OCC automatically exercises any equity options that are at least a penny in the money based on the closing price on expiration day. Sounds straightforward, right? Except it's not. If you're long an option, you can actually tell your broker to exercise it even if it's technically out of the money, or to NOT exercise it even if it's in the money. That's called contrary exercise or exercise by exception. And here's where pin risk becomes a real problem – when you're short options with a strike price sitting dangerously close to where the stock is trading on expiration.

Let me give you a practical example. Say you own a 50 delta put with a 100 strike expiring in two days. Bad news hits and the stock drops to 90. Smart move – you buy 100 shares at 90 instead of selling the put, locking in 10 bucks of profit and keeping your optionality intact. No matter what happens, you're making at least 10 dollars at expiration, and if the stock rallies, you could make more.

Then it does rally. Expiration day comes and shares hit 105. You're long 100 shares and you've got that put giving you the right to sell at 100. But why would you sell something at 100 when you can sell it for 105? So you do exactly that. Then the stock reverses and closes at 99.80. Your trading moves just netted you 1,500 in additional profit. Now here's where pin risk kicks in – that put looks in the money, but you don't actually want to exercise it. The extra 20 bucks isn't worth the hassle and fees. So you tell your broker not to exercise.

You're sitting pretty with no position and 1,500 in cash. But the trader who was short that same put? They're in for a nasty surprise. They probably structured their position to be delta neutral on Monday, expecting everything to net out. Instead, because you declined to exercise, they're suddenly short 100 shares with unlimited upside risk. That's pin risk in action – the uncertainty around whether an option will actually be exercised when it's sitting right on the strike price.

Here's another scenario. You own that same 100 put. Nothing special happens during the day and the stock closes at 100.50 – your put is out of the money. But you're still watching at 4:30 Eastern when negative news hits and the stock tanks to 85 in after-market trading. You've still got time to exercise. You buy 100 shares at the depressed price and submit instructions to exercise your put, locking in that same 1,500 profit.

Over the weekend, things get worse. The company's in real trouble. Monday opens at 75. That trader who was short the put? They turned off their screens at 4:01 and headed out for happy hour. Now they're looking at a 2,500 loss and climbing. Those were expensive beers.

The thing is, you don't even need a news story to trigger moves like this. Look at what happened with stocks like GameStop during the meme stock craze – the volatility around options expiration has been absolutely wild. If you've got long or short options expiring, you're not done when the closing bell rings on Friday. Pin risk is real.

If you're long, there might be opportunities to squeeze out extra profits. If you're short, you need to think strategically about whether someone holding the long side might make an unconventional choice. The pin risk scenario is exactly why you should be prepared for multiple outcomes.

Honestly, if I'm short and uncertain about what's going to happen, I'll cover half the position just to reduce that pin risk exposure. Or better yet, spend a dime to buy back your shorts at expiration even if you think they're about to expire worthless. It's cheap insurance, and you're probably already profitable enough to do it. That peace of mind is worth way more than the cost.

If you don't have any long options to monitor, then yeah – you can be the one shutting down the screens and heading out for that beer. With the money you made, you might even pick up the tab.