I'm studying the basics of options trading and just read a 'crash course' book where the author states the following:
...you won't walk away from a call option with cash in hand. The profit we are talking about in this case is "intrinsic value". You can now take that stock and write a buy contract on it, selling it on and making that tangible profit in the process. ... as an options trader, you're not looking to keep hold of a stock portfolio. You're purchasing stocks through contracts to turn around and sell for a profit.
So I have a fundamental question about long call options. Is the author here alluding to a requisite purchase of the underlying shares before a "buy contract" can be written against them? Surely, this is implied, because without executing the contract, you would have nothing to sell, right?
My confusion is compounded by a statements just a couple of paragraphs prior
Buying calls also allows you to consider shares that would ordinarily be out of your price range. ... Buying options on those stocks is a whole lot less expensive than buying the stocks themselves, ... This is call "leverage": the ability to control thousands of dollars in stock for just hundreds of dollars in premium.
Here again I'm lost - if you have to execute the position in order to profit, then you need the full amount of the contract to ultimately purchase those shares, right?
Lastly, if I have a long call that becomes valuable, whereby the strike price + premium is less than the current price of the stock, I then need to execute the option, buy buying the stock, before I can actually sell those shares (immediately after purchase) for a profit, right? Or is there some other way to realize the profit without actually purchasing the stock?