You hold one long TSLA $420 call. You do not have to wait for expiration - you can sell it back any time. Before the last day the option is usually worth more than its intrinsic value, because leftover time value lifts the smooth "value today" curve above the hard expiration payoff. Drag the spot dot, slide the close date toward expiry, and watch the extra time value melt away.
Option value vs stock price (fixed scale)
Value today (time value included) Value at expiration (intrinsic only) Where the stock is now (drag)
Premium paid (per share)-
Sell-to-close value now-
Profit / loss if you close now-
Intrinsic
Time
Intrinsic value-
Time value remaining-
Plain EnglishYou can sell an option back any time - you are not forced to hold it to expiration. Before expiration it usually holds extra time value on top of what it is worth right now, so closing early lets you take profits or cut losses without waiting for the last day.
Three things to know about closing early:
Time value is a bonus you give up by waiting. Before expiration the option trades above its intrinsic value; that gap is the time value, and it shrinks to zero on the last day.
Closing early can lock in a win or stop a loss. You sell the contract back for its current value instead of gambling on where the stock finishes at expiration.
The closer to expiry, the less cushion. As your close date approaches expiration the smooth curve collapses onto the hard kink, so the extra you can collect keeps fading.
Taxes are not shown here. Options and the underlying stock are taxed differently, and it depends on your holding period and account type. None of this is tax advice.