Abandonment 2

Example 1: Chioma buys an option to purchase shares on the Nigerian Stock Exchange at ₦50 per share. By the expiry date, the shares are trading at ₦35. Since it makes no sense to buy at ₦50 what is worth ₦35, she lets the option expire, this is called abandonment. Example 2: A trader in New York buys an option to purchase Apple shares at $200. By the expiry date, Apple is trading at $175. Rather than exercise the option at a loss, he simply lets it expire, walking away and accepting the small premium he paid as his only loss. This is abandonment.