stock option trading questions?
Posted by admin | Under stock options trading Monday Sep 14, 2009first off if you buy a stock option and the intrinsic value goes up to 2…. profit if u exercise is 200$.
Do you need the money to actually purchase the 100 stocks or do you sell an option that you bought cause it has increased value???
Over 90% of options never get exercised.
Your profit will likely be more than $200 if there is still time premium remaining.
People buy and sell options to make money, most do not care two bits about owning the underlying. Just sell-to-close the call, get the cash and do it again!
PS.. the one thing you might want to pay attention to is DIVIDENDS. If the underlying’s ex-div date is coming up and you want the dividend, you might want to exercise your call option to earn the dividend.
Hope this helps!
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.
The first part of your question about intrinsic value is correct if you are neglecting time decay, which is known as theta.
Most all stock option contracts never get exercised. Therefore, you would not actually buy the 100 shares. Typically, before the option expires you would sell the contract.
Mark
References :
Over 90% of options never get exercised.
Your profit will likely be more than $200 if there is still time premium remaining.
People buy and sell options to make money, most do not care two bits about owning the underlying. Just sell-to-close the call, get the cash and do it again!
PS.. the one thing you might want to pay attention to is DIVIDENDS. If the underlying’s ex-div date is coming up and you want the dividend, you might want to exercise your call option to earn the dividend.
Hope this helps!
References :
stock and option trader
option price (or premium) is comprised of intrinsic value and time value. so its should be that the price increase by 2.
On second part of ur que. u dont need to buy the shares u just take offsetting trade. the reason is if it is excercise it will not consider time value. so most of the trades are square off and not excercised.
References :
yes, we need the money if we exercise the options, but we don’t need money if we sell the option.
References :
Stock option trading
http://optiontradingstrategy.blogspot.com/