The risk to a trader who has sold an option that at expiration the price of the underlying security will be identical to the exercise price of the option. The trader, therefore, will not know whether the option is likely to be exercised.
The risk to a trader who has sold an option that, at expiration, has a strike price identical to, or pinned to, the underlying futures price. In this case, the trader will not know whether he will be required to assume his options obligations.
The risk to the seller of an Option that at expiration the Option will be exactly at-the-money. The seller will not know whether the Option will be exercised. This type of risk is an important issue for digital Options.
In respect of an option seller, it refers to the position where the price of the underlying security matches the option's exercise price at expiry and there is a risk of uncertainty faced by the option seller as to whether or not the option will be excercised.
The risk to an investor (option writer) that the stock price will exactly equal ...
Pin risk occurs when the underlier of an option contract settles close to the option's strike value at expiration. In this situation, the underlier is said to have pinned. The risk to the writer (seller) of the option is that they cannot predict with 100% accuracy whether the option will be exercised or not.