Pin Risk / Pinning

Pinning is the tendency for the underlying to gravitate toward a strike with very large open interest as expiration approaches, because dealer hedging around that strike compresses price toward it. Pin risk is the uncertainty of whether options finish just in or out of the money at that pinned level.

Near expiration, gamma at heavily-traded strikes becomes intense. Dealers hedging that gamma buy below the strike and sell above it, which mechanically pulls price toward the strike and holds it there - the market 'pins.' The effect is strongest on high-volume expirations and around round numbers.

For traders, pinning creates pin risk: a contract can hover so close to a strike that whether it expires in or out of the money - and whether you get assigned - is genuinely uncertain into the final minutes. It also means breakout attempts into a pinning strike often fail until the pinning open interest clears.

Pinning is a structural tendency estimated from positioning, not a guarantee. Strong catalysts can overwhelm it, and the pin can release sharply once the anchoring open interest expires.