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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18
votes
2answers
39k views

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 ...
16
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4answers
4k views

A beginner question on call option

So I made my first options transaction. I believe that a stock that is currently trading around 25, will be in the 40s, come August - based on my research (I know the stock well, and I've invested in ...
15
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5answers
2k views

Confused about employee stock options: How do I afford these?

I'm confused about stock options. The numbers in the following story are fictional because I'm keeping the actual offer confidential. This is an American private company with a promising future: ...
13
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1answer
1k views

Is there a reason to exercise a stock option as soon as it vests?

Background: I am currently employed by a start-up that, so far, is doing really well. As part of my contract, I have stock options that will come available on a typical vesting schedule. A quarter of ...
12
votes
2answers
6k views

What are the tax implications of exercising options early?

Say you have the following situation: You have pre-IPO stock options Half of the options have vested, the other half will vest over the next 2 years Your strike price is S The fair market value of ...
11
votes
9answers
40k views

Why are American-style options worth more than European-style options?

Why are American-style options worth more than European-style options? I realize I can exercise American-style options anytime before the expire, but I can only exercise European-style options ...
8
votes
1answer
88 views

Capital losses on early-purchased stock?

If I exercise an early purchase clause on employee incentive stock options to go ahead and purchase the stock and the company later goes bust, can I take capital losses against that stock?
7
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3answers
1k views

Any advantage to exercising ISO's in company that is not yet public?

I have ISO's in a private company and am trying to decide whether there is any advantage in exercising them. The price is low enough and my confidence in the company is high enough that I am ...
6
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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 ...
6
votes
2answers
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 ...
5
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4answers
542 views

How can it be possible that only ~10% of options expire worthless, and only ~10% are exercised?

While researching stock options, I have read in many places that options meet the following ends with the following frequencies: ~10% expire worthless. ~10% are exercised. ~80% are traded away; the ...
5
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3answers
2k views

Covered calls: How to handle this trade?

I bought XNPT (Xenoport) a couple of weeks ago at 6.93 I turned right around and sold the Apr 16 call. $8.00 strike and collected 1.50 in premium. Today I get a great surprise that XNPT has rocketed ...
5
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2answers
1k views

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 ...
5
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2answers
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?
5
votes
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 ...
5
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2answers
13k views

If my put option reaches expiration on etrade and I don't log in to the site will it automatically exercise if it's in the money or be a total loss?

I ask because suppose you don't manually exercise and expiration day hits and it's in the money..do you lose it all or is the in the money gain automatically credited to your account?
5
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2answers
362 views

What to consider before buying (exercising) a family member's private company employee stock options, about to expire?

My brother-in-law is leaving a private tech company. He has $100,000 in stock options (fully vested) which he must either purchase, or abandon completely upon his exit. This is not a startup — ...
5
votes
2answers
287 views

What's the point of abandoning an in-the-money option? (i.e., not exercising it)

What's the point of abandoning an in-the-money option? (i.e., not exercising it) (Related: Exercise an out of the money option)
5
votes
2answers
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 ...
4
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3answers
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 ...
4
votes
1answer
2k views

How can the writer of an option cancel or reverse the position & obligation before exercise or expiration?

How can the writer of, say, a call option cancel or reverse the position and its obligation (to deliver shares) before the option is exercised or the expiration date reached? Can an option that has ...
4
votes
2answers
6k views

Why are so few options ever actually exercised?

What is the reason that only a minor percentage of options get exercised (17%, I read on the OIC website)? If on expiration, the option is in the money, it will be either automatically exercised, or ...
4
votes
2answers
800 views

Is it best to exercise options shares when they vest, or wait

For my situation, is it better for me to exercise all my option shares whenever they vest (are exercisable), or is there any advantage to waiting? What are the pros and cons? What is the tax aspect, ...
4
votes
2answers
290 views

Can you write a put option without sufficient funds to meet the potential obligation?

When writing a put option does your account have to be funded so that if the buyer exercises the right to sell you can meet your obligation, or can you write the put option without the funds to meet ...
4
votes
2answers
146 views

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 ...
4
votes
2answers
475 views

Payroll taxes on exercised stock options

The company I work for was recently sold. As part of the buyout, non-qualified stock options held by certain employees were exercised and sold immediately to the buyer. Since multiple employees were ...
4
votes
1answer
268 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 ...
3
votes
4answers
6k views

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 ...
3
votes
6answers
6k views

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 ...
3
votes
2answers
162 views

Perform exercise-and-hold AND exercise-and-sell-to-cover?

Suppose I was granted 100,000 shares of ISO stock in a startup in the US with a strike price of $1/share and current valuate of $1.25/share. These shares are 100% vested when I leave the company and I ...
3
votes
3answers
980 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 ...
3
votes
1answer
125 views

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 ...
3
votes
3answers
164 views

Options and exercise

Why do people exercise call options early? If the price of the stock rises above the exercise price, the profit from selling the option would be greater than the profit from exercising the option and ...
3
votes
1answer
81 views

Transfer of stock of non-public company after vesting

Suppose an employee of a non-public company has "some" stock options. Can that person, after vesting, generally transfer the ownership of some of those (exercised) shares to another party? I want to ...
3
votes
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 ...
3
votes
1answer
106 views

Do European options have to be exercised at a specific time on Expiry day?

European Options as compared to American Options can only be exercised on a certain date. As I want to start writing options, I want to know whether it can be exercised by the buyer at anytime during ...
3
votes
2answers
367 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, ...
3
votes
1answer
2k views

What is the correct way to report incentive stock options (ISO) on federal taxes?

In 2011, I exercised incentive stock options and received a 3921 Form (I did not receive a 1099-B). However, judging by my W2, it looks like my exercised stock option income was included in Box 1 of ...
3
votes
3answers
188 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 ...
2
votes
2answers
4k views

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 ...
2
votes
3answers
386 views

Why is early exercise generally not recommended for an in-the-money option?

Why is it said that early exercise of a (call) option is not recommended and it is always better to sell the option instead? Is it just to avoid assignment fees? Of course, we assume that the option ...
2
votes
2answers
965 views

Exercise an out of the money option

For listed options in NYSE,CBOE, is it possible for an option holder to exercise an option even if it is not in the money? What about early exercise for OTM American option, is it possible? Under what ...
2
votes
2answers
414 views

What ways can an employee keep the upside of stock options after leaving?

Suppose that you work at some private company and that company offers some stock options to you as part of employment. For the sake of discussion, suppose they offer 100 000 options at $0.50 an option,...
2
votes
5answers
8k views

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(...
2
votes
5answers
154 views

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 ...
2
votes
3answers
2k views

When does it make sense to early exercise a deep in the money put option

I understand the logic for call options. When dividends exceed the time value left, then it is profitable to early exercise a call. But the same does not hold for a put. So, when to early exercise a ...
2
votes
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
votes
2answers
94 views

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 ...
2
votes
3answers
554 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 ...
2
votes
1answer
643 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 ...