Questions tagged [option-exercise]

In options trading, the option holder has the right but not the obligation to buy or sell the underlying instrument at a specified price on or before a specified date in the future. Exercise means to put into effect the right specified in an option contract.

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109 views

No margin account and put expires ITM

This question is a followup to a recent and similar question on buying a put: When a long PUT expires in-the-money, whose shares are being sold?. Suppose I don't have a margin account, and I buy a ...
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Exercising Options question. Please check my math

I'm spending some time learning options and I have a scenario question. I'm attempting to have this make sense in my head but this just doesn't seem right or maybe I'm missing something. I see this ...
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I sold call options that expired ITM. Why were they not exercised?

I sold two covered call positions that expired Aug 9. Both expired ITM. The 1st one's strike price was $3.00. At expiration, the stock was $3.13 so 13 cents ITM (6 contracts). The 2nd one's strike ...
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Exercising options is not instantaneous

As I understand it, exercising an option does not happen immediately. You send in the instructions to exercise and it gets done at market close for that day. What if, in between the moment you send in ...
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How do you go about exercising a put option with less than 100 shares?

I've 50 shares of a company and I'm wanting to leverage that with a put option (Buy to Open, with the expectation share price might drop). When the prices is right and I want to exercise the option(...
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Why buy a vertical spread if I could instead buy a naked call?

If I believe a stock will go up, say from a price of $100, and I wish to execute an options strategy that would make me money if the stock were to rise, why would I want to setup a vertical spread ...
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6answers
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Exercising an option without paying for the underlying

As a follow up to my other question, I would like to know whether the following is possible: I have $20,000 in my brokerage account The price of the $300 call is $5.00 (1 contract = 100 shares) I buy ...
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1answer
69 views

ISO exercise limit before triggering AMT

With recent 2018 changes to AMT, I wanted to understand how much ISO options can I exercise without making a material difference in AMT Scenario Current income 200k Claiming standard deduction for ...
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What tax forms should I expect if I exercise and sell options from a company where I am no longer employed?

This article suggests that if I were to exercise options that I was granted as part of an ISO grant and then sell them in the same year, the bargain element would be recorded in my W-2 form. What ...
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49 views

What happens to long otm oex puts if you exercise them?

Since OEX index options are cash settled and are American style, what would happen if you decided to exercise an out of the money put? Would you end up paying the difference between the strike and ...
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1answer
237 views

Why is there a significant disparity between 409A valuation and fair market value?

I'm at an interesting juncture where I have the opportunity to exercise some ISOs at a startup, and I'm somewhat confused at the disparity between the two valuations. In my case, I can exercise my ...
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219 views

How to know FMV of ISOs?

I'm researching when is best to purchase ISOs I've been vesting at a private venture-backed startup. My understanding is that when I exercise, AMT will trigger and I will have to pay those taxes based ...
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130 views

Stock Option Value correlated to net worth of company

If a year ago a company issued stock options at a $5 exercise price per share, but today they issued them at a $2.50 exercise price per share, does that mean the company has been de-valued by 50%, or ...
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Is this legal: going long on call options and artificially increasing the price of the underlying asset seconds before expiration?

Let's say I bought a particular call option and own the majority of it. On the very last second (before the expiry date, seconds before the market closes), if I bought every single offer in the ...
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Why does shorting a call option have potential for unlimited loss?

Referring to http://en.wikipedia.org/wiki/Option_(finance), for a short call: If the stock price increases over the exercise price by more than the amount of the premium, the short will lose ...
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987 views

What would the broker do about this naked call option?

Let's say there is a stock of ABC currently at $8, and I sell a (naked) call option on it, with a strike price of $10 and expiration in two months. Suppose my broker lets me do this if I have 50% of ...
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167 views

Who (owner/ writer)needs to pay the option assignment fees

When an option is exercised, there is an option assignment fee that needs to be paid to the (broker/clearing house)? So if the options expire worthless, this fee need not be paid. But in the case ...
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Buying puts without owning underlying

I'm looking to buy puts for short-term option trading. My time horizon is a week to two weeks at most. I only ever trade the options - I never hold to expiration. When I attempt to buy a put, I get an ...
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1answer
3k views

Understanding on closing an option

I have read that there are three scenarios when it comes to closing an option: You can buy or sell to “close” the position prior to expiration. The options expire out-of-the-money and worthless, so ...
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1answer
231 views

Difference in Value between General American & European Options

I am trying to get a grip on the difference in value between American and European options. I have read up on and understand that the value of an American call option is equal to that of a European ...
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370 views

a “fully” American option strategy?

Is there such a thing as an American butterfly spread? For a European butterfly spread simply buying 1 put with strike price X+a, 1 put with strike price X-a and shorting 2 calls with strike price X, ...
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2k views

Why would someone want to buy an option on the day of expiry

If I buy an Out of Money option and the option becomes In the money on the Friday of expiry, can I still expect to sell the option and close my position at a profit? Or is my only hope is to exercise ...
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What happens to options if a company is acquired / bought out?

I have some out of the money options with pretty far off expiry dates (Jan 2013, for example). What happens if the underlying company is acquired before then, while I'm still holding the options? Do ...
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2k views

What happens to an options contract during an all stock acquisition?

Let's say for the sake of the question you're given the following scenario: Company BIG is trading at $10/share Company SML is trading at $40/share BIG reaches an agreement with SML for an all stock ...
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803 views

How can I estimate the value of private stock behind employee stock options?

I'm considering an offer with generous options. I have pretty high risk tolerance, so I'm just trying to estimate the expected value of the options. To the extent possible, I want to base this on the ...
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I sold my earned incentive stock options back to my employer - how is the money taxed?

I recently sold my vested incentive stock-options back to my employer (i.e. so rather than having to spend $20,000 of my own money to exercise my options and make very little paper gain initially, I ...
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1answer
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Can written options be exercised against you prior to expiry when they become “in-the-money”?

I'm talking practically. For example: Suppose I write 10 contracts with strike $102 for 50 cents an option, with expiry two weeks from now, with stock price at $100. A week from now stock hits, say, ...
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1k views

Why hold calls until expiration?

I am reading a book on options basics. I am in a chapter on selling covered calls. The author says that buyers of calls almost always hold the calls until expiration. Why is this? Here's how I ...
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Find buyer for private stock?

I've got options to exercise "in the money" by March. However, I would like to sell part of the stock I will buy. The company is not publicly traded. In the agreement I've got the right to sell to ...
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2k views

Why deep in the money options have very low liquidity

I understand that OTM options with low deltas are not that attractive, hence liquidity is less. But how about deep ITM options, why is the liquidity not there? Deep ITM options are a cheap way to ...
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119 views

Common Stock Options Value

Definitely related to this: Job Offer - Explain Stock Options [US] This is the language of the employment contract: At the outset of your employment you will be provided with an initial grant of ...
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1k views

Can a put option and call option be exercised for the same stock with different strike prices?

Refer to http://finance.yahoo.com/q/os?s=PEI&m=2011-10-21 If I were to sell a call @ 15 and sell a put @ 13, come October 21, is it possible for BOTH of the options sold to be exercised?
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Dividend arbitrage using in the money puts

I was looking at dividend arbitrage It seems all I need to do is find stocks with a nice dividend(e.g KO). Then find an in the money put where the time premium is less than the dividend to be paid. ...
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1answer
71 views

Short position with bullish outlook

I am just starting to learn about options and about puts and calls. Traditionally, I assumed that being short on a position means having a bearish outlook to the market. However, when you are an ...
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2answers
242 views

Option settlement for calendar spreads

Hypothetical: let's say it's Jan 17, 2015 and AAPL is at 100. My portfolio contains: Long 1 Jan 23, 2017 Call Option for AAPL at 60 Short 1 Jan 17, 2015 Call Option for AAPL at 90 20,000 USD cash ...
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1answer
647 views

Am I doing the math for this long straddle strategy correctly?

I'm looking at making a long straddle trade, and I'm trying to make sure I have the math correct before making the trade. Here are the details in the example I want to work out: I'm using options on ...
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2answers
2k views

What are my risks of early assignment?

I have started writing covered puts and calls recently. Everything I read talks about the risk of early assignment of your position, but I don't really understand how often this happens. It seems that ...
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1answer
270 views

How can I track the value of options live in my portfolio

With stocks I can enter price and amount into most applications and they allow me track the total Profit / Loss live. Are there any ways to do this with option positions? I was considering entering ...
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2answers
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Question about option chain

https://beta.finance.yahoo.com/quote/GOOG/options?ltr=1&date=1516320000 OK, can't I just SELL "350 @ $395 and BUY "340" @ $391 and pocket $4 immediately and realize another $10 if and when the ...
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What is the Meaning of the Black-Scholes Value?

We are currently learning about the Black-Scholes Merton Model. I understand the process of finding the call option. However, I'm wondering what the answer actually means. For example: Stock Price ...
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2answers
1k views

Am I doing the math for this covered call/long put strategy correctly? What risks do I run with this strategy?

In this trade, I write an in-the-money covered call and buy an in-the-money put (as an example) on GM, expiring in September 2014. The call premium is $10.02 with a strike of $26, and the put premium ...
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1answer
77 views

Can I get an assignment notice as soon as I sell a covered call

If I sell an American style ITM covered call, then in theory, can I get an assignment notice as soon as I have sold the call, since the counterparty can opt for early exercise? Does this ever happen ...
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1answer
115 views

does an option provide better liquidity than outright stock purchase?

Suppose the following scenario I have an option to buy stock X for 20,000 Shares, The break-even price is reached at price 15.00 The stock is currently trading at 14.50, the paid for option price is ...
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1answer
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How does reporting AMT for shares later sold as long-term cap gain work? [duplicate]

I'm unsurprisingly confused: If I exercise ISOs in Jan 2017 and sell them in Feb 2018, how is income reported for AMT purposes and profit reported for cap gain purposes -- are BOTH reported on my ...
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296 views

Bid price… sudden Drop

I have a call option that is 45 day out from expiration. The stock price is sitting at about twice my strike price. Why did my bid price dropped from $2.00 to .10 in one day? Is my only option now to ...
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4answers
88 views

Call vs Puts: a short position can profit using both depending on strike price?

I'm confused about whether you want to own a call or put if you believe a stock price will go down. Most articles have described owning Puts as betting the stock will go down, and calls as betting ...
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1answer
212 views

Employee stock option plan with undefined vesting?

As an employee, I have received stock options from my company. However, about vesting, it says only that the board determines it. There is no further info, no vesting period is stated, no further ...
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3answers
175 views

Confusion about trading options

There is one thing I do not get about trading options (let's restrict this to calls), and no online resource I've come across seems to talk about the following scenario. There are 3 parties in this: A,...
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1answer
142 views

Is there anything to do immediately after exercising stock options?

I'm at a startup and I just exercised my incentive stock options. I believe I'll need to pay the alternative minimum tax (AMT). Is there anything to be done this year or should I wait until tax ...
2
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3answers
560 views

Options profit calculation and cash settlement

I have a question regardnig call options. For example: 108-strike AAPL options expiring Dec 24th are 83 cents. That means the cost of one contract would be 83 + 5 (commission) = 89 dollars ...