never traded options before. and here I am, with some Q options all in green (wow). 30 contracts due in July.
here is my question. i can sell the contracts and make a profit. I can also exercise the option (strike at $40), but then i need to find the money. What's the benefit of buying the stock instead of selling the option? isn't exercising the option equivalent to selling the option then buying the stock in the open market? wouldn't the 2nd approach give me more flexibility? please advise.
and when to exercise if I decide to buy the stock? wait until right before the expiration? why?
by the way, i am long. thanks.
If they expire "In-The-Money" you could wind up w/shares on margin, depends on how yer account is set up. Make sure it's to set-up so you won't, unless you actually want shares. "Talk to Chuck" (yer Broker).
Building on what Nomad said, you usually have the ability to exercise options until they expire, but most retail brokers like mine (Scottrade) will NOT let you exercise your "in-the-money" options a day before they expire. If you let them expire, most brokers will wait for day end, automatically exercise your options if you are in-the-money, and then they will replace them with shares to your account and deduct the funds from your cash and margin. If you don't have enough money or margin to cover the cost, the good ones will usually still exercise them using the brokerage's cash and pay you close to what the profit would have been had you sold the option or exercised it yourself. They will keep or sell the shares themselves. Someone correct or tweak this if I missed anything or got anything wrong. GLTA
Sentiment: Strong Buy
Oh by the way----I'm assuming you are trading off charts and watching res. I do have Aug opt triggers With a break of res but trying to monitor as much as possible. If you exercise 120,000 always a lot more leverage trading with options
Just checked open int. You should be fine. You would probably be better off with Aug. because the july's expire before earnings. Even if you sell right before earnings you may benefit from An Implied Volatility spike.
Good question. $40+the option price would be your entry. Not sure of the liquidity----Never loaded up that heavy with low open interest. When Loaded up that heavy always looked for open interest around 500 just because some educators suggested it. Good Luck.
Hey fender. In my trading acct.---I look for a high open interest because if I load up and get stopped out, I want the liquidity so my sell price is as close to the stop price as possible. Traded one and got legged out and didn't like the average sell price. Also, I may only be in a trade for an hour or two. Different then the share acct. and trading options to average down PPS. Different rules for different plans. Let me know when you can get to Ft. Worth We'll talk then.