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Celsion Corp. Message Board

  • boaz.barilan boaz.barilan Nov 25, 2012 12:23 PM Flag

    Question regarding options

    I hope people will be kind enough to educate me: I never held options thru their expiration day. However, this time I have CLSN January (17) options and I intend to keep them as late as possible. Suppose the results are as good as we hope: do I get the options expiration value without doing anything?

    Sentiment: Strong Buy

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    • Many thanks for the very helpful answers

    • With Scottrade if the stock is 1 cent over the strike price on option day and you have money in your account, they will exercise the option and buy the stock. There is a $17 fee for this.If the stock is worth more then the strike price you can sell the call and take your profit instead of buying the stock. Check with your brokerage firm. George

    • You HAVE to exercise the option or it will expire worthless even if in the money.

    • I hope this helps:
      -The current price of X Corp stock is $45 per share, and investor 'boaz.barilan' expects it will go up significantly. boaz.barilan buys a call contract for 100 shares of X Corp from 'Clint,' who is the call writer/seller. The strike price for the contract is $50 per share, and boaz.barilan pays a premium up front of $5 per share, or $500 total. If X Corp does not go up, and boaz.barilan does not exercise the contract, then boaz.barilan has lost $500.

      -X Corp stock subsequently goes up to $60 per share before the contract is expired. boaz.barilan exercises the call option by buying 100 shares of X from Clint for a total of $5,000. boaz.barilan then sells the stock on the market at market price for a total of $6,000. boaz.barilan has paid a $500 contract premium plus a stock cost of $5,000, for a total of $5,500. He has earned back $6,000, yielding a net profit of $500.

      -If, however, the X stock price drops to $40 per share by the time the contract expires, boaz.barilan will not exercise the option (i.e., boaz.barilan will not buy a stock at $50 per share from Clint when he can buy it on the open market at $40 per share). boaz.barilan loses his premium, a total of $500. Clint, however, keeps the premium with no other out-of-pocket expenses, making a profit of $500.

      -The break-even stock price for boaz.barilan is $55 per share, i.e., the $50 per share for the call option price plus the $5 per share premium he paid for the option. If the stock reaches $55 per share when the option expires, boaz.barilan can recover his investment by exercising the option and buying 100 shares of X Corp stock from Clint at $50 per share, and then immediately selling those shares at the market price of $55. His total costs are then the $5 per share premium for the call option, plus $50 per share to buy the shares from Clint, for a total of $5,500. His total earnings are $55 per share sold, or $5,500 for 100 shares, yielding him a net $0. (Note that this does not take into account broker fees or other transaction costs.) GLTAL

 
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