Why do some expiration dates have more open interest for options?
"The third Friday of each month is an expiration for the monthly options on each stock.  Stock with standardized options are in one of three ""cycles"" and have four open months at any give time.  See http://www.investopedia.com/terms/o/optioncycle.asp In addition some stocks have weekly options now.  Those generally have less interest because they are necessarily short-term.  Anything expiring on April 8 and 22 (Fridays this year but not third Fridays of the month) are weeklies. The monthly options are open for longer periods of time so they attract more interest over the time that they are open.  They also potentially attract a different type of investor due to their length of term, although, as it gets close to their expiration date they may start to behave more like weeklies."
"The question is, how do I exit? I can't really sell the puts because there isn't   enough open interest in them now that they are so far out of the money. I have about $150K of funds outside of this position that I could use, but I'm   confused by the rules of exercising a put. Do I have to start shorting the stock? You certainly don't want to give your broker any instructions to short the stock! Shorting the stock at this point would actually be increasing your bet that the stock is going to go down more. Worse, a short position in the stock also puts you in a situation of unlimited risk on the stock's upside – a risk you avoided in the first place by using puts. The puts limited your potential loss to only your cost for the options. There is a scenario where a short position could come into play indirectly, if you aren't careful.  If your broker were to permit you to exercise your puts without you having first bought enough underlying shares, then yes, you would end up with a short position in the stock. I say ""permit you"" because most brokers don't allow clients to take on short positions unless they've applied and been approved for short positions in their account. In any case, since you are interested in closing out your position and taking your profit, exercising only and thus ending up with a resulting open short position in the underlying is not the right approach. It's not really a correct intermediate step, either. Rather, you have two typical ways out: Sell the puts.  @quantycuenta has pointed out in his answer that you should be able to sell for no less than the intrinsic value, although you may be leaving a small amount of time value on the table if you aren't careful.  My suggestion is to consider using limit orders and test various prices approaching the intrinsic value of the put.  Don't use market orders where you'll take any price offered, or you might be sorry. If you have multiple put contracts, you don't need to sell them all at once. With the kind of profit you're talking about, don't sweat paying a few extra transactions worth of commission. Exercise the puts.  Remember that at the other end of your long put position is one (or more) trader who wrote (created) the put contract in the first place. This trader is obligated to buy your stock from you at the contract price should you choose to exercise your option.  But, in order for you to fulfill your end of the contract when you choose to exercise, you're obligated to deliver the underlying shares in exchange for receiving the option strike price. So, you would first need to buy underlying shares sufficient to exercise at least one of the contracts.  Again, you don't need to do this all at once.  @PeterGum's answer has described an approach. (Note that you'll lose any remaining time value in the option if you choose to exercise.) Finally, I'll suggest that you ought to discuss the timing and apportioning of closing out your position with a qualified tax professional. There are tax implications and, being near the end of the year, there may be an opportunity* to shift some/all of the income into the following tax year to minimize and defer tax due. * Be careful if your options are near expiry!  Options typically expire on the 3rd Friday of the month." It is possible to exercise an out of the money option contract. Reasons to do this: You want a large stake of voting shares at any price without moving the market and could not get enough options contracts at a near the money strike price, so you decided to go out of the money. Then exercised all the contracts and suddenly you have a large influential position in the stock and nobody saw it coming. This may be favorable if the paper loss is less than the loss of time value that would have been incurred if you chose contracts near the money at further expiration dates, in search of liquidity. Some convoluted tax reason. As other answers state, selling the options contracts to the market is a definite way out, and probably the best in most cases.  If you're determined to exercise your options (or there's not enough liquidity to reasonably sell your contracts to the market), then you could plan ahead and exercise smaller number of contracts at a time and sell the resulting position in the underlying, which will give you funds to exercise some more contracts and sell the underlying.    If you think you're going down this path, however, make sure that you take into account your broker's rules for settlement.  You may need to start the exercise / sell cycle before the option's expiration date. "Exercising an option early if you can't sell the underlying stock being purchased is generally not advisable. You're basically locking in the worst price you can possibly pay, plus you're losing the time value on your money (which is, admittedly fairly low right now, but still). Let's say you have a strike price of $50.  I get that you believe the stock to be worth more than $50.  Let's assume that that's probably, but not certainly right. Whether it's worth $51, $151, or $5,100 when your options are going to expire, you still get the profit of $1, $101, or $5,050 if you wait until expiration and exercise then.  By exercising now, you're giving up two things: The interest on the money you pay to exercise from now until expiration. The guarantee that you can't lose anything.    If you buy it now, you get all the upside above your strike, but have all the downside below it. If you buy it later (at expiration), you still have all the upside above your strike, but no downside - in the (assumed to be unlikely) event that it's worth less than the strike you can simply do nothing, instead of having something you bought at the strike that's worth less now and taking that loss.  By exercising early, you take on that loss risk, and give up the interest (or ""carry"" on the money you spend to exercise) for no additional updside. It's possible that there are tax benefits, as other posters mention, but the odds that ""starting the clock"" for LTCG is worth as much as the ""optionality"", or loss protection, plus the ""carry"", or interest that you're giving up is fairly unlikely." That question makes assumptions that don't hold in general As to why to deal with futures:  Well, there's just one contract per maturity date, not a whole chain of contracts (options come at different strike prices).  That in turn means that all the liquidity is in that one contract and not scattered across the chain. Then, moreover, it depends what underlying contracts you're talking about.  Often, especially when dealing with commodities, there is no option chain on the spot product but only options on the futures contracts. In summary, the question is somewhat bogus.  Options and futures evolved historically and independently, and were not meant to be substitutable by one another.  So their rights and obligations are just a historical by-product and not their defining feature.  I suggest you refine it to a specific asset class. "Exercising an option early if you can't sell the underlying stock being purchased is generally not advisable. You're basically locking in the worst price you can possibly pay, plus you're losing the time value on your money (which is, admittedly fairly low right now, but still). Let's say you have a strike price of $50.  I get that you believe the stock to be worth more than $50.  Let's assume that that's probably, but not certainly right. Whether it's worth $51, $151, or $5,100 when your options are going to expire, you still get the profit of $1, $101, or $5,050 if you wait until expiration and exercise then.  By exercising now, you're giving up two things: The interest on the money you pay to exercise from now until expiration. The guarantee that you can't lose anything.    If you buy it now, you get all the upside above your strike, but have all the downside below it. If you buy it later (at expiration), you still have all the upside above your strike, but no downside - in the (assumed to be unlikely) event that it's worth less than the strike you can simply do nothing, instead of having something you bought at the strike that's worth less now and taking that loss.  By exercising early, you take on that loss risk, and give up the interest (or ""carry"" on the money you spend to exercise) for no additional updside. It's possible that there are tax benefits, as other posters mention, but the odds that ""starting the clock"" for LTCG is worth as much as the ""optionality"", or loss protection, plus the ""carry"", or interest that you're giving up is fairly unlikely." The put vs call assignment risk, is actually the reverse: in-the-money calls are more likely to be exercised early than puts. Exercising a call locks in profit for the option holder because they can buy the shares at below market price, and immediately sell them at the higher market price. If there are dividends due, the risk is even higher. By contrast, exercising an in-the-money put locks in a loss for the holder, so it's less common. Conceptually, yes, you need to worry about it.  As a practical matter, it's less likely to be exercised until expiry or shortly prior. The way to think about paying a European option is: [Odds of paying out] = [odds that strike is in the money at expiry] Whereas the American option can be thought of as: [Odds of paying out] = [odds that strike price is in the money at expiry] + ( [odds that strike price is in the money prior to expiry] * [odds that other party will exercise early] ). This is just a heuristic, not a formal financial tool.  But the point is that you need to consider the odds that it will go into the money early, for how long (maybe over multiple periods), and how likely the counterparty is to exercise early. Important considerations for whether they will exercise early are the strategy of the other side (long, straddle, quick turnaround), the length of time the option is in the money early, and the anticipated future movement. A quick buck strategy might exercise immediately before the stock turns around.  But that could leave further gains on the table, so it's usually best to wait unless the expectation is that the stock will quickly reverse its movement.  This sort of counter-market strategy is generally unlikely from someone who bought the option at a certain strike, and is equivalent to betting against their original purchase of the option.  So most of these people will wait because they expect the possibility of a bigger payoff. A long strategy is usually in no hurry to exercise, and in fact they would prefer to wait until the end to hold the time value of the option (the choice to get out of the option, if it goes back to being unprofitable).  So it usually makes little sense for these people to exercise early.  The same goes for a straddle, if someone is buying an option for insurance or to economically exit a position. So you're really just concerned that people will exercise early and forgo the time value of the American option.  That may include people who really want to close a position, take their money, and move on.  In some cases, it may include people who have become overextended or need liquidity, so they close positions.  But for the most part, it's less likely to happen until the expiration approaches because it leaves potential value on the table.  The time value of an option dwindles at the end because the implicit option becomes less likely, especially if the option is fairly deep in the money (the implicit option is then fairly deep out of the money). So early exercise becomes more meaningful concern as the expiration approaches.  Otherwise, it's usually less worrisome but more than a nonzero proposition.