Pin Risk

Pin risk is the uncertainty faced by an options seller (writer) when the price of the underlying asset is trading very close to the strike price of a short options position as expiry approaches. When price is near the strike at expiry, it is unclear whether the option will expire in the money (requiring settlement) or out of the money (expiring worthless)—and this ambiguity can shift in the final minutes of trading. The seller faces the risk of being assigned an unwanted long or short position if the option expires just in the money, while having hedged as though it would expire worthless. In Indian markets, pin risk is particularly relevant around Nifty and Bank Nifty weekly expiries, when large open interest at key strikes can cause the index to gravitate toward those levels.