Bought a call
- Expires out of the money: worthless (you lose any premium you paid).
- Expires in the money: you are obligated to buy 100 shares at the option strike price for every option you bought. You make money by selling at market to close the long position (buy low, sell high) minus the premium you paid.
Sold a call
- Expires out of the money: worthless (you keep the premium someone paid you when they bought the option).
- Expires in the money: you are obligated to sell 100 shares at the option strike price for every option you sold. What happens is your broker buys the shares at the current market price and sells them to the other party at the strike price. You eat the difference. Risk is theoretically unlimited. You keep the premium you collected.
Bought a put
- Expires out of the money: worthless (you lose any premium you paid).
- Expires in the money: you are obligated to sell 100 shares at the option strike price for every option you bought. You make money by buying at market to close the short position (sell high, buy low in this case) minus the premium you paid.
Sold a put
- Expires out of the money: worthless (you keep the premium someone paid you when they bought the option).
- Expires in the money: you are obligated to buy 100 shares at the option strike price for every option you sold. Risk is limited to the share price reaching $0. You get to keep the premium paid to you.