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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2answers
2k 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 = ...
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Can you keep exercised EMI options after leaving a company?

I'm fairly unknowledgeable regarding financial matters, so any help would be greatly appreciated. I have been granted EMI options with my current employer, half of which have vested. The company is ...
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Wouldn't it always make sense to be an Option Writer (seller)?

I've read multiple times that options are rarely, if ever, exercised, and 90+% usually expire into nothingness. If that's the case, wouldn't you always want to be an option writer? If nobody is ever ...
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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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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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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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1answer
144 views

Why exercise ISO/QSO early?

What advantage would there be to exercising incentive stock options early? I understand that for lowest US income taxes, you have to wait 2 years after excising to sell. But two years now vs. two ...
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1answer
163 views

How to determine option exercise limits?

I recently bumped up against the exercise limit for number of option contracts I could hold at once. I.e. a message saying I couldn't hold more than 500 when attempting to do a Buy to Open on Call ...
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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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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)
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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 ...
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1answer
243 views

Do we always get back AMT money for stock options?

I'm thinking of early exercising my stock options. One of the reasons is that I won't have to pay alternative minimum tax (AMT) now (strike price is equal to fair market value). But from what I ...
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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 ...
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3answers
238 views

Reason for “qualified” buyer requirements to exercise stock options/rights spun off from parent company?

Recently a company in which I own a few shares issued a bunch of options for a portion of their business which was not previously traded publicly. This subsidiary business will begin trading publicly ...
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1answer
416 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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1answer
231 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 ...
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1answer
829 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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1answer
79 views

Unwinding unvested shares bought at different prices when departing a company in California

My company repriced their options and the price dropped. Let's say the price went from $5 to $2 (not actual numbers). I'd early-exercised 75% of my grant at $5 and (later) exercised the remaining ...
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1answer
594 views

Option exercise timing / OCC operating principles (premarket)

Let's assume the following scenario: American style long call option contract heavily in the money (CBOE) Couple of days to expiration Very high risk that underlying asset will fall sharply when ...
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3answers
820 views

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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4answers
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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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2answers
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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 ...
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4answers
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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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Selling employee stock options now and waiting for Long Term Capital Gains or selling later

I've got some options that I'm looking to exercise and am trying to figure the best way to go about it. I always thought that exercising options and then waiting for long-term capital gains was the ...
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1answer
107 views

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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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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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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1answer
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Buying stock options in private company

I have been working at a start-up company for the past 4.5 years in the US. The company is still private. It is not going to go public. The owners are looking to sell once they get a good offer. I don'...
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3answers
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Call option- premium fall with rise in spot price

The premium of the below call keeps falling although the price is increasing and it still has more than a month until expiry. The current spot price is 392. Shouldn't the in the money strike premium ...
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2answers
946 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, ...
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2answers
714 views

Stock options: what happens if I leave a company and then an acquisition is finalized?

If this situation occurs and I have 75% of my shares vested and I have a 60 day window to exercise the vested options upon termination (my choice not company's choice) can I reap the financial ...
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3answers
820 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 ...
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1answer
121 views

Should I early exercise unvested ISOs when the FMV is above the strike price?

I have unvested ISOs from a job I started this year, and recent revisions to our policies have given employees the ability to early-exercise their options. However, it's been several months since my ...
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3answers
120 views

When can we exercice an option?

Can we only exercice an option when it expire ? For exemple I have an Adobe option with a strike price of 87.50$ and expiring on 2016-01-15. Adobe stock have already raised above my strike price. ...
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3answers
82 views

Exercising Options before expiry?

If XYZ is priced at $100,and I buy a January 2017 $100 CALL, and the price reaches $130 only after a month of buying this option, will exercising this option immediately return a profit? Let's say ...
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1answer
198 views

How to exercise options when you they're worth more money than you have? [duplicate]

This is a hypothetical situation, I'm not actually in this position. I'm also an amateur with this, so correct me if I make any mistakes. Let's say a stock is $100. You buy $4,000 worth of $0.50 call ...
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1answer
108 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 ...
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1answer
128 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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8answers
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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 a call option with $300 strike price is $5.00 (1 ...
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3answers
642 views

Can I trade options purely as a leveraged product?

Following the Three Ways to Buy Options article from NASDAQ, there are supposedly three different ways to trade options after buying them: Exercise the option at maturity Exercise the option before ...
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1answer
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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 ...
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2answers
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What are the tax consequences of ISO exercising with an 83B election after the stocks FMV has gone up?

I came across a lot of posts that talk about 83B and ISO vesting but still could not answer questions specific to my situation. I am trying to understand tax implications with exercising in the ...
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3answers
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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 ...
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1answer
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Can I exercise my put if a company goes bankrupt?

If I purchase a stock and a protective put, and the company goes bankrupt, can I still sell my stock at the strike price of the put?
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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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3answers
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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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Do I just let an options conversion/reversal trade go to expiration?

Let us say I lock in a small riskless profit using a conversion. Which means (as an example), I sell a call, buy a put and buy stock, and net a credit of .20. What do I do next? Do I just let the ...
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3answers
576 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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1answer
397 views

How to calculate and claim AMT credit

Suppose I am in California, and I want to try to roughly calculate the AMT i would owe as well as how much i can get back each year for ISO that i plan to hold for many years. Am i doing this right? ...
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1answer
1k views

How is Company's Stock option exercise price calculated ?

My wife's company went public last year and we got few stock options with them at the price of $2 She has 500 stocks vested at this point and lock out period has opened up. Current company stock ...