Term: ABANDON

An option contract which is not enforced because it is out-of-the-money. Options confer a right to either buy (call) or sell (put) a certain quantity of shares (or other instruments) at a fixed price before a specified date. If they are not exercised then the option is said to have been “abandoned” – thus an abandon is an option which has not been exercised and has subsequently lapsed. Derivatives traders do not want their options to become “abandons” because then they will have lost the price which they paid for the contract. The writer of the contract will have profited from selling the contract.

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