Monday, January 16th, 2017

Exercising or Selling a Call Option?

I Have Bought a call option But as to whether am confused Exercise Should I sell it or it. What is a good strategy to follow? Does Exercise or sell one? Needless to say That I am new to the whole field of options trading. Any advice Would Be Greatly appreciated. Thanks!

Comments

5 Responses to “Exercising or Selling a Call Option?”
  1. Victor Lyon says:

    If you want to earn money from share market forgot option trading.

  2. JoeyV says:

    You should almost never exercise a call prior to expiration because you lose all the time value of the option. If there is significant time before option expiration, sell the option rather than exercise it.

  3. drmark27 says:

    Being confused is very dangerous in trading when emotions come into play (and they will). What to do with the call option should be decided before ever buying it. This is your trading plan. You should know when you will take profits, when you will close at a loss, when you will add to, and when you will subtract from a position.

    No offense intended but this endeavor is extremely difficult; if you’re confused by what to do with an ITM call then you have no business trading options unless you want to lose all of your trading capital.

  4. clayjar_azn says:

    You bought an option but have no clue what to do? That is like diving into a pool and not bother to look if it is full of water.

    Stop buying options and do more reading and research on stock options.

    Usually you just sell it to make a profit. BUt if you want the stock for a longer term, you can exercise it. You should have a strategy before you buy an option.

  5. Rolf Golf says:

    Professional options traders sell their call options instead of exercise them.

    This is because selling the options allow you to recover remaining extrinsic value in the option which will disappear immediate if you exercise the options. In fact, if you are trading out of the money call options which has appreciated, it is impossible to make a profit exercising the options, so you can only profit by selling it.

    Here’s an example:

    For instance XYZ company shares are trading at $50 and you bought an out of the money call option at the strike price of $55 for $0.50. XYZ shares then rallied to $55 and the $55 strike price call options are now worth $1.50.

    In this case, if you exercised the call options, the whole $1.50 will disappear and you will buy XYZ shares at the strike price of $55. Since XYZ shares are also trading at $55, there is no profit to be made by buying XYZ shares at $55. In fact, you would have also lost that $0.50 you spent on the call options and made a loss instead.

    However, if you simply sell the call options at its current price of $1.50, you would have made $1.50 – $0.50 = $1.00 or 100% profit !

    See? In the above example, exercising the profitable call option leads to a loss instead and the only way to profit is to sell it.

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