Exercising call option?
1 year ago
I bought a call option, when the stock was $15 and strike price $17.50. Stock is $17.70 now and expires September, 2013. Is it smarter to exercise the call option and buy the stock, or just sell the call option and make profit?My other question is how do i exercise on Scottrade? I know I use "buy to open" and "sell to close" when I trade call options.Thank you in advance

TAG:exercise question option profit price
Best Answer
It is almost always more profitable to simply sell to close a profitable call options (or put options) trade rather than exercise for the underlying stock and then selling those stocks for profit in the market. However, if you really find the need to exercise an option, all you have to do is click on the "Exercise" link beside your position rather than "Trade".

I just answered this exact same question in extreme detail at http://www.optiontradingpedia.com/answer... which you might want to check out because its really way too long and detailed to post here.

In that tutorial, I outline the only few scenarios in which exercising is better than selling (including ex-dividend) and explain why even with those scenarios (even in the case of ex-dividend), professional options traders would still prefer to simply sell rather than exercise.
Other Answers
Usually a call option is only exercised at the expiration date. Right now with about 2 months to go, I believe you have to sell your option and then buy the stock. However, since I have never done that, I suggest you call a local broker at Scottrade as they have offices almost anywhere, and get the exact procedure to be followed.
It's easier and faster to sell the contracts rather than exercise them. If you exercise you will have to come up with the money to pay for the 100 shares you will be buying at 15.00

You can call Scottrade to exercise, if you decide that's the way you want to go.
if you think its going to go below 17.50, put it up for sale. the more it goes up, the better.