Sell the call if you can't afford to exercise?

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First of all, selling and exercising call options are two completely different activities that has completely different procedures in options trading. As such, lets explore both scenarios individually.

Selling profitable call options is what all professional options traders prefer to do. Exercise call option sell immediately is because selling profitable call options allows you to salvage extrinsic value remaining in them which will immediately evaporate if you exercise those call options. Exercise call option sell immediately such, unless there is a very strong reason to own the underlying stock despite losing a fair bit of profitability, almost all options traders would simply take profit on profitable call options by selling them.

Selling call options is exactly like selling a stock. In Options Trading, Exercising profitable call options allow you to buy the underlying stock at the strike price of the call options. Now, call options do not necessarily need to be in the money in order to become profitable. You could have also bought out of the money call options which has gained in value without getting in the money in the first place. In this case, you would certainly not exercise the call options in order to take profit but simply sell them for the profit.

This is because exercising out of the money call options will make you buy the underlying stock at a price HIGHER than the market price which results in an instant loss.

Assuming you own a profitable in the money call option and wish to exercise the options for the underlying stock, what happens is that your call options would disappear from your account so that you can buy the underlying stock at the stated strike price. Yes, you will have to fork out payment for the underlying stocks, the stocks do not go into your account for free. It does not give you for FREE the underlying stock at the strike price.

Yes, there is no free lunch in options trading. Lets see an example of how that works. Furthermore, profitable call options might not necessarily remain profitable once exercised if the underlying stock has not reached the breakeven point of the position yet. In such cases, the only way of taking profit is to sell the call options. If exercise call option sell immediately exercise the call options Step 1: Asked exercise call option sell immediately 5 July Perfect for all Options Traders!

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The average individual investor should probably never exercise an option. There are a couple of exceptions, but if you are someone who buys options, these probably do not apply to you. I recommend selling the options any time you want to exit the trade.

Most brokers charge a relatively high fee to exercise. If you then sell the shares you just bought, you must pay another commission. What was the point of exercising? Just sell the option.

When you exercise a call option, you take possession of the shares. That means you must pay for the shares, using cash. In either case, you pay interest to use cash. Current interest rates are low, but they will not always be low. This is a waste of money. This is a real danger when you exercise an option prior to expiration, and is something that many investors fail to recognize. If you own a call option and the stock plunges, your loss is limited to the value of the option.

But, if you converted your calls to stock, your loss becomes essentially unlimited when the stock declines rapidly. Some investors exercise the options when expiration arrives, planning on unloading the shares when the market opens the following Monday. This involves an unnecessary risk. Why take that chance? Sure, the price may be higher and you reap an extra profit. Just sell your calls before the market closes Friday.

Each of the problems listed above occurs when you exercise an option. It may pay to accept those costs or risk, if there were something to gain. But exercising the stock and holding it gives you all the risks of a stockholder, with no benefits.

If you want to maintain a long position in the same stock, sell your old option and buy another option with a later expiration date.

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