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Is it possible to sell to close a call/put option I own for a profit even if the underlying stock price has not exceeded the strike price? If my cost basis is .10 per contract and that same option is now trading with an ask price of .25 and last price of .20, can you sell to close at a price of .20-.25 for a profit?

Thank you for any feedback provided.

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Yes, if there is liquidity you can sell your option to someone else as a profit. This is what the majority of option trading volume is used for: speculative trading with leverage.

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Absolutely. There is no requirement that an option be in-the-money for you to close out a position.

Remember that there are alwayes two sides to a trade - a buyer and a seller. When you bought your option, it's entirely possible that someone else was closing out their long position by selling it to you.

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At the higher level - yes. The value of an OTM (out of the money) option is pure time value. It's certainly possible that when the stock price gets close to that strike, the value of that option may very well offer you a chance to sell at a profit. Look at any OTM strike bid/ask and see if you can find the contract low for that option. Most will show that there was an opportunity to buy it lower at some point in the past.

Your trade. Ask is meaningless when you own an option. A thinly traded one can be bid $0 /ask $0.50. What is the bid on yours?

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    +1 for the last paragraph - I didn't catch that in the question. – D Stanley Jun 21 '17 at 18:17
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Borrow cost may also affect premium but that doesn't happen very often so let's skip that one. If an option has time premium remaining, it experiences time decay every single day (decreases). If implied volatility increases and/or share price moves in your direction, premium increases. If the latter two exceed the amount of time decay, the value of your option increases.

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