01-19-2021, 03:17 PM
Questions about when and how to exercise options
<!-- SC_OFF --><div class="md"><p>I understand the basic concepts of options (covered/naked, put/sell) but I have questions about when or how to exercise the options.</p> <p>Let's say.. I buy 1 contract (100 shares) today ,call, XYZ, strike price @40, 5/20. The premium is $100 total. Today XYS is selling at $8 per share.</p> <p>1.My understanding with American options, they can be exercised at any time BEFORE the expiration date. Say the stock reaches 40 on 2/28. Can I exercise it on 2/28? I've read that we should wait until the expiration date. Why? What would be the advantage of this?</p> <p>2.I read too that most people don't even buy the stocks but rather re-sell the options. How does this work? Same example.. the stock reaches 40 on 02/28. does the expiration date change? since I'm reselling it? am I reselling for the same premium?</p> <p>ANy help would be appreciated</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/RagingHomo_Sapiens"> /u/RagingHomo_Sapiens </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/l04qo6/questions_about_when_and_how_to_exercise_options/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/l04qo6/questions_about_when_and_how_to_exercise_options/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>I understand the basic concepts of options (covered/naked, put/sell) but I have questions about when or how to exercise the options.</p> <p>Let's say.. I buy 1 contract (100 shares) today ,call, XYZ, strike price @40, 5/20. The premium is $100 total. Today XYS is selling at $8 per share.</p> <p>1.My understanding with American options, they can be exercised at any time BEFORE the expiration date. Say the stock reaches 40 on 2/28. Can I exercise it on 2/28? I've read that we should wait until the expiration date. Why? What would be the advantage of this?</p> <p>2.I read too that most people don't even buy the stocks but rather re-sell the options. How does this work? Same example.. the stock reaches 40 on 02/28. does the expiration date change? since I'm reselling it? am I reselling for the same premium?</p> <p>ANy help would be appreciated</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/RagingHomo_Sapiens"> /u/RagingHomo_Sapiens </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/l04qo6/questions_about_when_and_how_to_exercise_options/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/l04qo6/questions_about_when_and_how_to_exercise_options/">[comments]</a></span>Kind Regards R