I'm a little confused on how this article comes up with $650 instead of $700.
Consider the following example:
XYZ is currently trading at $99.00
You own one XYZ Oct 90 call option
The XYZ Oct 90 call option is priced at $9.50
October expiration arrives in two weeks
1) Increased Risk Exercising this call option prior to expiration increases risk. More importantly, you gain nothing by taking on added risk.
When you own the call option, the most you can lose is the value of the option, or $950. If the stock rallies, you still own the right to pay $90 per share. It is not necessary to own the shares to profit from a price increase and you lose nothing by continuing to hold the call option. If you decide you want to own the shares (instead of the call option) and exercise, you effectively sell your option at zero and buy stock at $90 per share.
Let's assume one week passes and the company makes an unexpected announcement. The market does not like the news and the stock opens for trading at $85 and sinks to $83. That's unfortunate. If you own the call option, it has become almost worthless and your account has dropped by $950. However, if you exercised the option and own stock, your account value has decreased by $1,600, or the difference between $9,900 and $8,300. This is an unacceptable loss because there was never a chance to gain by exercising the call option and, although you were unlucky, you lost an additional $650.
Exercising the call option at $90 a share for 100 shares would cost me $9,000. If the stock is at $8,300 it means that I'm down $700
How did Investopedia come up with $650? Am I missing something?