EXPIRATION & SETTLEMENT
Plain English
Options have a defined lifespan. When the clock runs out, ITM options are automatically exercised and you end up with stock. OTM options simply vanish. Understanding this prevents unpleasant surprises.
Going deeper
Most equity options expire on the third Friday of the expiration month (though weeklies and dailies now exist). At expiration, options that are $0.01 or more in-the-money are automatically exercised by the OCC (Options Clearing Corporation). This means you will buy (if you hold a long call) or sell (if you hold a long put) 100 shares of stock at the strike price. If you don't want this, you must close the position before expiration. Settlement is typically T+1 for options and T+2 for resulting stock positions.
Examples
Auto-Exercise
You hold a $50 Call and forget about it. The stock closes at $50.15 on expiration Friday. Your broker auto-exercises the option and you wake up Monday owning 100 shares of stock purchased at $50 — you need $5,000 in your account.
Pin Risk
You sold a $50 Call spread. The stock closes at exactly $50 on expiration. You don't know if your short call will be assigned. The stock gaps down Monday and you're stuck with shares you didn't want. This is 'pin risk.'