Stocks & Commodities V. 26:8 (68): Explore Your Options by Tom Gentile

Stocks & Commodities V. 26:8 (68): Explore Your Options by Tom Gentile
Item# \V26\C08\161EYO.PDF
$2.95
Availability: In Stock

Product Description

Explore Your Options by Tom Gentile

AUTOEXERCISE EXPLAINED

If I hold a call option into expiration and I do nothing, what happens? Will it expire no matter what, or do I need to tell my broker to sell it?

If you donít close an option position before expiration, two things can happen depending on whether the option contract is in-the-money (ITM), at-themoney (ATM), or out-of-the-money (OTM). Remember, an OTM call option is one where the strike price is higher than the stock (index, exchange traded fund [ETF], or futures) price. An OTM put has a strike price below the current stock price. An ATM option has a strike price equal to the stock price.

OTM and ATM options expire worthless. They have no embedded value and there is no incentive for the holder to exercise that option. If I hold an XYZ call option with 50 strike price and XYZ is trading at $49 a share, why would I exercise an option to buy XYZ for $50 when I can pick it up in the market for $49 a share? On the other hand, if the stock is trading for $51 and I hold the XYZ 50 put option, there is no reason for me to exercise that put and sell shares for $50 when the market will buy it for $51. There are instances when slightly OTM options are exercised by the holder, but in most cases OTM and ATM options will expire worthless because they have no real or embedded value.




FOR THOSE ORDERING ARTICLES SEPARATELY:
*Note: $2.95-$5.95 Articles are in PDF format only. No hard copy of the article(s) will be delivered. During checkout, click the "Download Now" button to immediately receive your article(s) purchase. STOCKS & COMMODITIES magazine is delivered via mail. After paying for your subscription at store.traders.com users can view the S&C Digital Edition in the subscriber's section on Traders.com.




Take Control of Your Trading.
Professional Traders' Starter Kit
All these items shown below only $299.99!
  • 5-year subscription to Technical Analysis of STOCKS & COMMODITIES, The Traders' magazine. (Shipping outside the US is extra. Washington state addresses require sales tax based on your locale.)
  • 5 year access to S&C Archive
  • 5 year access to S&C Digital Edition
  • 5-year subscription to Traders.com Advantage.
  • 5-year subscription to Working Money.
  • Free book selection.
  • Click Here to Order