Is it better to close an option position before expiration rather than holding until expiry? It’s a universal internal fight: do you lock in a solid win now, or chase that absolute maximum profit right to the wire? In this deep dive, we cut through the theoretical noise to unpack the practical realities of managing your exits.

We explore why many experienced traders view expiration day as a "circus" of dry liquidity and irrational price swings. You'll learn why the final 20% of potential gain often comes with outsized risk due to accelerating Gamma and Theta, and why closing early is fundamentally about compounding discipline rather than just capital. We also cover the rare exceptions—like deep out-of-the-money options or strategic exercises—where holding on is actually the smarter move.

Tools & Resources Mentioned: Optimal Exit research, GTC (Good Til Canceled) Limit Orders, and Tastytrade research studies.

Trading is about buying freedom, not stress. How often could having a clear exit strategy—knowing when to bank a 'good enough' win—prevent a much bigger loss of time, energy, or peace of mind in your life outside the markets? Subscribe to the Options Trading Podcast for more conservative guidance!

Key Takeaways

• The "Circus" of Expiration Day: Liquidating at the very end is often chaotic. Bid-ask spreads widen, and "dumb moves" (irrational price swings) can happen as big players close massive positions, making it hard to get a fair price.
• The Law of Diminishing Returns: Chasing the last 10–20% of profit exposes you to massive Gamma risk, where small stock moves cause violent swings in option prices. It is often safer to book an 80% win and "stack" consistent gains.
• Eliminate Assignment Drama: Closing early is the only way to 100% guarantee you won't be surprised by a weekend assignment, which can tie up capital and force you into unintended stock positions.
• Exceptions to the Rule: It only makes sense to hold to expiry if the option is so far "out-of-the-money" that the commission to close it is more expensive than the contract's value, or if you genuinely intend to own the underlying stock.
• Data-Backed Discipline: Research shows that closing trades at 50–75% of max profit typically improves overall win rates and significantly reduces the size of average losses when trades eventually go bad.

"You trade to buy freedom, not stress. That final 20% of profit isn't worth the 80% of total risk you take on in the final days."

Timestamped Summary

• 2:50 – What actually happens at the 4 PM wire.
• 3:51 – Why the source calls expiration day a "circus".
• 6:30 – The math of Gamma: Why the end is the riskiest time to hold.
• 9:37 – When to hold: deep OTM shorts and saving on commissions.
• 13:47 – The Tastytrade Study: Why the 50-75% rule improves your win rate.
• 18:21 – 5 Actionable steps to automate your exits today.

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